Swiss GDP beat estimates on improving exports

Swiss GDP numbers came out significantly better than economist’s had anticipated. Swiss exports which rose 3.9% QoQ and 9.5% YoY is the main driver for the beat.
The fact the EUR CHF gravitated between 1.07 and 1.0950 and USDCHF traded close to parity during that period may have given the Swiss economy some respite.

SNB will closely watch ECB outcome next week

Over the coming days the focus will slowly shift to the ECB on the 10th of March. Considering the high expectations and the subsequent disappointment of last year, investors might be more cautious this time.
Yet, there is a fair chance Draghi will not want to deceive the market twice in a row. Latest quotes from ECB members clearly point to an intervention in March.
With European banks having seen their cost of debt rising fast, and the ECB wanting to stimulate credit, the latter will most likely want to back its financial system.

We expect an increase of the QE size to at least 70B/month and an additional rate cut of 10 bp.
 
Thomas Jordan made it clear that the SNB will reassess its policy depending on the ECB outcome. Given our above expectations, it is fair to assume that the SNB will most likely cut interest rate further into negative as a response.  
 
In addition, on Monday, the foreign currency reserves are going to be closely expected. In fact, given the recent path of the EURCHF, it will be interesting to see how this figure will come out.
The last figure was 575.4bn but we can expect this figure to rise. It will help us assess if the drop in the EURCHF rate was softened by the SNB or if the institution did not intervene at all.

In our opinion, it should have intervened and the Foreign Currency Reserves should have risen significantly.
 
ANDREAS RUHLMANN
IG Bank S.A., Market Analyst