"The SNB has concluded the sustained strong increase in mortgage loans and the prices of Swiss residential properties has caused the imbalances to become even greater in the current low interest-rate environment"
- The Swiss government
The U.S. Dollar– Swiss Franc cross has been moving towards strong support at 0.8853, suggesting the pair can be highly volatile soon, keeping in mind two possible scenarios– a penetration of the level and a bounce back. As always, the pair is mostly driven by fundamental news form the world's largest economy rather than the Alpine country. Even a release of UBS consumption indicator had a minor impact on financial markets as investors are focusing on Janet Yellen's testimony later this week.
A monthly report from the UBS bank showed a gauge of consumption trends slowed to 1.44 points in January, compared with 1.81 points a month earlier, with the widespread weakness among business sectors. The situation in the retail sector deteriorated significantly, while the number of new car registration fell 7% over the period, falling to a three-and-a-half year low of 20,000. The only bright spot was the subindex of consumer confidence that managed to stay above its long-term average.
While consumer and producers prices are still struggling to grow, stronger domestic consumption can boost economic growth. Currently, the government projects a 2.3% for 2014 and a 2.7% growth in 2015. These forecasts and bold statements from Swiss authorities raised speculations the cap on the Swiss Franc will be removed soon.
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