FX Trading: Economic Indicators for Switzerland

FX trading resources help investors predict future trends of a national currency. Here is a list of some of the economic indicators for Switzerland that should help the wise forex trading investor successfully turn a profit.

Swiss Trade Balance

Switzerland has a small population and limited resources. Therefore, foreign trade is very important to the country’s economy. Trade statistics, such as the Trade Balance report released monthly by the Swiss National Bank, can have significant impacts on the financial markets and on forex trading.

Exports include everything from chocolate and watches to mechanical engineering and chemicals. Demand for these products by major trading partners such as Italy, France, Germany, and the United States is often high.

A positive trade balance, which signifies a trade surplus, indicates greater foreign consumption of Swiss goods. Since these goods are typically paid for in Swiss currency, Forex trading platforms will often see an increased demand for Francs and also an increase in the value of the Franc. A negative trade balance will have the opposite effect, lowering the demand for and value of the Franc.

Swiss Gross Domestic Product (GDP)

Like all countries, Switzerland’s GDP is the value of all final goods and services that are produced with in the nation’s borders during a specified time period. The formula for calculating GDP is as follow:

GDP = C + I + G + (EX – IM)

C = private consumption

I = private investment

G = government expenditure

EX = exports of goods and services

IM = imports of goods and services

Many forex brokers and traders use GDP to gauge the overall health of an economy. High growth rates indicate a boom, while low or negative growth indicates a recession.

The Swiss GDP report, released quarterly by the Swiss Federal Statistics Office, tends to have a powerful effect on FX trading. GDP growth can lead to inflation, and the Swiss Central Bank may raise interest rates in response. During periods of low or negative GDP reports, the Swiss Central Bank may lower rates in an effort to bolster the economy. Such rate changes can potentially affect the price of and demand for Francs on forex trading platforms.

Swiss Consumer Price Index (CPI)

Inflation reflects the decline of a currency’s purchasing power: each unit of currency buys fewer goods and services. CPI is calculated by determining the change in price of a basket of particular consumer goods and services. The goods and services in the basket represent purchases typically made by an average household, and the figure is used to gauge monthly and yearly changes in the cost of living.

The Swiss Federal Statistical Office releases a monthly report on the country’s CPI. In an effort to control inflation, the Swiss National Bank may raise interest rates in response to a rise in CPI. These higher interest rates would have a direct effect on FX trading because higher interest rates make the Franc more enticing for foreign investors. Higher demand for the Franc places upward pressure on its value. The opposite is true in the case of a lower CPI.

Swiss National Bank Three-Month Target Libor Rate

The primary policy instrument of the Swiss National Bank (SNB) is their Three-Month Target Libor Rate. In an effort to control inflation, the SNB raises rates; lowering rates is an attempt to encourage economic growth. Rate changes will have impacts on mortgages, bank yields, bond rates, and costs and returns of consumer loans. Because of these effects, rate changes will also have a hug influence on the economy and financial markets such as forex trading.

Switzerland’s financial sector is a large part of the country’s economy, so changes to the Libor rate affect the profitability of that sector. When Libor rates are increased, the demand for Francs increases as well. Libor rate decreases lessen demand.

Forex Trading Practice

When beginning to learn the basics of FX trading, practice first on a free forex demo account, where you can learn the ropes without risking money. Once you have the hang of interpreting forex news, open a real account to start investing for a profit.

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