The Swiss economy is being pressured by rising interest rates.

The Swiss franc continues to depreciate steadily, and it is expected to further depreciate in the future. This depreciation trend has been most pronounced since March due to the reduced inflation rate, which limits the Swiss National Bank's (SNB) ability to raise interest rates further. Such a move would pose a risk of further economic slowdown and recovery difficulties.

In Switzerland, the annual inflation rate increased slightly to 1.7% in September from 1.6% the previous month. However, on a monthly basis, there was a 0.1% decrease in the inflation rate after a 0.2% increase in the previous month. The sectors that contributed the most to the increase in inflation were housing and energy. Despite this, the inflation rate in Switzerland has been consistently decreasing in recent quarters, which is one of the reasons why SNB decided to maintain its policy interest rate at 1.75% in its recent meeting.

The divergence in interest rates between SNB and the Federal Reserve (Fed) has led investors to shift their risk towards assets with lower risk and higher returns. The yield on 10-year US government bonds has increased to over 4.83%, while Swiss government bonds of the same maturity yield only 1.16%. Additionally, the not-so-strong economic growth has caused Switzerland's GDP to decline significantly in the second quarter and may continue to impact GDP in the third quarter.

The Swiss manufacturing PMI improved to 44.9 in September from 39.9 the previous month, although it remains below 50, indicating a contraction for the ninth consecutive month. This recovery is attributed to the decreased pressure from inflation, increased orders, and higher production output. However, job hiring has not seen significant growth.

Retail sales in Switzerland decreased by 1.8% YoY in August, with a continued decline in sales, especially in food products. This is likely due to some degree of importation of raw materials from abroad, causing food prices to rise despite a decrease in inflation.

The economic sentiment indicator in Switzerland dropped to 95.9, significantly below market expectations of 90.5. This reflects weaker economic growth and increased borrowing costs due to SNB's interest rate hikes, which will continue to exert pressure on the economy going forward.

Techical analysis data (5H)

Resistance: 0.9231, 0.9238, 0.9250

Support: 0.9212, 0.9200, 0.9193

Source: Investing.com