(04 DECEMBER 2018)DAILY MARKET BRIEF 1:Swiss inflation eased more than expected

Switzerland’s headline inflation missed expectation in November. The consumer price index rose only 0.9%y/y, following an uptick of 1.1% in the previous month, while market participants anticipated an increase of 1%y/y. This is the lowest reading since April 2018, when inflation rose 0.8%y/y. More worryingly, the core gauge that excludes the most volatile components such as energy products eased to 0.2%y/y, compared to forecast of 0.4%.

There are increasing signs that the Swiss economy is suffering from the rise in geopolitical uncertainty. As suggested by the last GDP figures, the slowdown in European growth, and international trade, had a significant impact on the Swiss economy. The gross domestic product fell 0.2%q/q in the third quarter, compared to an expected increase of 0.4% and an improvement 0.7% in the previous one. Against such a back, there is no doubt that the Swiss economy will continue to suffer. In its upcoming Quarterly Bulletin, which will be release on December 12, the Swiss National Bank (SNB) will doubtlessly adjust both its inflation and growth forecast to the downside.

On Tuesday, despite a sell-off in equities the greenback fell across the board, with the Dollar index giving up 0.64%. The Swiss franc was up 0.43%, while the single currency rose 0.55%. Investors are slowing reducing their exposure to the buck amid mounting expectations that the Fed is almost done with its hiking cycle.