SNB plays the same record!

Switzerland’s foreign trade remained subdued in August amid weak demand from the US and Asia. Exports rose 0.6%m/m in August, while previous month figure was downwardly revised to -2%m/m from -1.4%. Imports contracted 2.8%m/m, compared to -1.3% in July. The trade balance rose to CHF 1.4bn, up CHF 200mn from the previous month. Trade activity with the European Union remains solid, even though imports has been contracting over the last few months. However, it looks like the trade war initiated by the Donald is weighting on the US-Switzerland trade activity as well. Finally, the Swiss franc appreciated during the second half of August; therefore, it would reasonable to expect further contraction of trade activity in the coming months.

Separately, the Swiss National Bank left its expansionary monetary policy unchanged, as widely expected. The monetary institution sticks to its usually wording as it maintains its view that the Swiss franc is “highly valued” and acknowledges that the Swissie “appreciated noticeably” since the June monetary policy assessment. Not surprisingly, the SNB did not miss the occasion to highlight the risks posed to the positive outlook by international trade tensions and political uncertainties, mostly in Europe. Despite this warning, the SNB acknowledges the solid momentum in economic growth, both domestically and internationally. Finally, the inflation forecast for the third quarter has been revised to the upside, but the institution revised 2019 forecast to the downside.

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Overall, the SNB is true to itself and didn’t budge as it reiterates its promise to intervene in the FX to weaken the Swiss franc should conditions warrant. Thomas Jordan will not take the risk to increase rate before the ECB. Higher interest rate in Switzerland is therefore not for tomorrow.