Swiss Trade Balance Shows Issues on the Continent
- Trade balance misses completely
- Second derivative of EU growth
- Switzerland a microcosm of global economy
While a lot of people don’t pay much attention to the Swiss Trade Balance figures, it’s a huge mistake not to. That’s because while the Swiss economy isn’t necessarily known for its mass exports, it’s a secondary indicator for the European Union.
Currently, there are a lot of concerns about the European Union and whether or not it is going to bounce back from extreme lows. The Europeans have been stabilizing somewhat, but there are still mixed signals when it comes to the EU and the global economy on the whole.
Announcement came out negative
The Swiss Trade Balance, or exports going out of Switzerland, measured a reading of Fr.1.96 billion, which was much lower than the anticipated Fr.3.14 for the previous month.
While this was a huge miss, what is lost on most traders is the fact that 85% of Swiss exports end up in the European Union. So, the second derivative of this economic indicator is to assume that the European Union’s consumption is dropping. This is very interesting considering that the EU has in theory been stabilizing a little, but it is doing so at extraordinarily low levels of economic growth.
These results will have to be taken into the context of global growth as yet another sign that there could be major issues out there. While the buzzword of the day is “coronavirus”, this will have had nothing to do with it.
There are plenty of concerns out there regarding the growth of economic activity on the whole. After all, the European Union is one of the major sectors when it comes to the global economic landscape.
Economic situation will continue its sluggishness
Going forward, it’s very likely that the economic situation will continue to look sluggish, as the growth situation around the world continues to be one of the major longer-term issues. While Switzerland itself isn’t a huge economy, it is a microcosm of what has been going on globally.
The drive into the Swiss franc will continue to be an issue for Switzerland, as it makes Swiss exports much more expensive than in other regions of the world. Unlike most global currencies, it looks likely that the Swiss franc will continue to strengthen as the economic numbers get worse, as it is considered to be a safety asset.
Beyond that, it should be noted that Switzerland’s largest trading partner, the European Union, continues to see sluggish economic growth at best. Unlike most other currencies, that is the most important currency to measure the Swiss franc against, second only to the US dollar. Both currencies have been losing strength against the franc.
Going forward, the Swiss franc will most probably continue to be a safe haven asset, especially as the Swiss National Bank has already stated that there were no plans to intervene in the currency markets.