Guidelines for Major Economies: Switzerland

Switzerland1291Founded in, located in central Western Europe, it shares many similarities in history and culture with Germany, Austria, Italy, and France.

Although located in the center of Europe, Switzerland is not a member of the European Union. stay90In the mid-1990s, there were talks between the European Union and Switzerland, but ultimately Switzerland rejected the proposal to become a member of the European Union. Since then, Switzerland has maintained economic independence.

Switzerland is a small country, but it is densely populated. The population of Switzerland is approximately778Ten thousand, approximately per square mile447People.

Switzerland is known for its neutrality, and it did not join either side in two world wars.

Switzerland: Facts, Data, and Characteristics

• Neighboring countries: Germany, France, Italy, Austria
• Area:15,940Square miles
• Population:7,952,600
• Population density:477.4Square miles
• Capital: Bern
• President of the Swiss Confederation: Schrenpf(Eveline Widmer-Schlumpf)
• Currency: Swiss Franc(CHF)
• Main imports: machinery and transportation equipment, pharmaceuticals, other chemicals, and finished products
• Main exports: chemicals, watches, food, musical instruments, jewelry, machinery, pharmaceuticals, rare metals, textiles, Rolex, Federer(Roger Federer)
• Import partner: Germany27.7%, USA10.6%Italy10.3%France8.4%Russia4.4%UK4%
• Export partner: Germany21.2%, USA8.7%France8.2%Italy7.9%Austria4.5%
• Time zone: Dongyi District
• Website:http://www.switzerland.com/en.cfm/home

Economic Overview

From the perspective of average personal income, Switzerland is one of the wealthiest countries in the world（GDPDivided by population).

2010In, Switzerland's total output was5299USD100mn Although it is a small country, its per capitaGDPup to46815US dollar, ranked second in the world7。

Its main trading partners include Germany, the United States, France, Italy, Austria, Russia, and the United Kingdom. Like Japan, the Swiss economy mainly relies on exports, with a total export volume of3083100 million US dollars, accounting forGDPof58.2%。

Switzerland's main industries include machinery, chemicals, textiles, precision instruments, and watches. Don't laugh at the last item - it accounts for a very important part of Switzerland's total output! Anyway, we need to continue.

Monetary and fiscal policies

Swiss Central Bank(SNB)Currently, Jordan(Thomas Jordan)Preside over the formulation of relevant monetary policies that affect monetary and credit terms and conditions. The management committee responsible for central bank policies consists of only three members - the chairman, vice chairman, and a third person.

Unlike most central banks, the Swiss Central Bank sets3Monthly interest rate range(Libor)Instead of a fixed value.

The purpose of the Swiss Central Bank is to control the country's money supply and influence interest rate levels, in addition to maintaining the stability of the Swiss franc price.

The extremely strong Swiss franc will lead to a surge in inflation while also suppressing Swiss exports. Due to the strong dependence of the Swiss economy on exports, the Swiss Central Bank prefers a weaker Swiss franc, so it will not hesitate to interveneforeign exchangeThe market has made the Swiss franc relatively weak.

One of the main monetary policies of the Swiss Central Bank is to position inflation. The country's inflation target is toCPITo measure standards, usually lower than2%Every year.

The Swiss Central Bank will operate and adjust through open market operationsLiborInterest rates affect the actual inflation rate of the country.

When it comes to open market operations, the Swiss Central Bank uses short-term repo(repo)sendLiborChanges occur. Repurchase trading refers to selling a specific security, obtaining cash, and promising to buy back the original bond.

If the interest rates in the open market exceed the standards of the Swiss Central Bank, the central bank will conduct repurchase transactions at lower repurchase rates, thereby increasing the liquidity of other banks.

On the other hand, the Swiss Central Bank reduces liquidity by increasing repurchase rates, ultimately achieving an increaseLiborThe purpose of.

From a fiscal perspective, one of Switzerland's more attractive fiscal policies is that it has lower taxes among developed countries. In fact, it is seen as a "tax haven".

The scope of corporate tax in Switzerland is8.5%reach10.0%. This and Swiss bank secrecy laws have made Switzerland one of the most suitable countries for doing business in the world.

Understanding the Swiss franc

Not long ago, France, Belgium, and Luxembourg all referred to their currencies as francs until they chose the euro. Currently, Switzerland is the only country to use the franc as its domestic currency. Its currency is called the Swiss franc.

Among all the financial wonders, the Swiss franc is also known as“Swissy”。

Fortunately, Switzerland maintains neutrality

Influenced by bank secrecy laws, Switzerland has always maintained political neutrality, making the Swiss franc a "safe haven". Usually, when the economic situation is uncertain, investors will transfer their funds to Switzerland, promoting the appreciation of the Swiss franc.

I am still trapped in the shining era!

Switzerland is not only unwilling to join the European Union, but also the only country that adheres to the gold standard.

The country25%Our cash is based ongoldSupported by reserves, this has achieved a correlation between the Swiss franc and gold prices80%. This means that once the gold price rises, the Swiss franc will benefit accordingly.

Important economic data related to the Swiss franc

GDPGross Domestic Product (GDP) measures the total price of a country's end products and services. This report reflects the changes in the overall economic output in the previous period.

Retail sales: Retail sales reports measure the monthly changes in the total price of goods sold through retail.

Consumer Price Index(CPI)：CPIMeasure the price changes of a basket of products and services.CPIIt is usually of great concern to the Swiss Central Bank as this report is typically used to analyze inflation situations.

Trade Balance: The trade balance measures the difference between the total prices of imported and exported goods in a country. Switzerland has developed exports, so traders measure the state of the country's economy through trade balances.

What factors will affect the trend of the Swiss franc?

Gold price

As mentioned earlier, due to Switzerland25%The cash is supported by gold reserves, so the correlation between the Swiss franc and gold prices has reached80%. The price of gold rose, and the Swiss franc rose accordingly. On the contrary, if gold prices decline, the Swiss franc will also decline.

The Development Status of the Eurozone and the United States

Due to Switzerland being an export-oriented country, its economic development is influenced by its Eurozone trading partners and the United States. Switzerland's main export partner in the Eurozone is Germany(21.2%)France(8.2%)Italy(7.9%)Austria(4.5%)。

The United States accounts for% of Switzerland's total exports8.7%. The poor economic performance of any of these countries means that Switzerland's trade volume will decrease.

Neighboring countries

The political tensions in its European neighbors, especially those in the eurozone, will cause traders to turn to the Swiss franc, seeking safety and avoiding risks.

Remember that the eurozone is governed by17The European Central Bank is responsible for formulating and implementing relevant monetary policies for the group.

Considering the different pace of economic development among member countries, the policies of the European Central Bank sometimes do not match the policies required by a particular country.

Unknown factors

dollar/The Swiss franc is sometimes subject to cross exchange rates, such as the euro/The influence of the Swiss franc. The rise in European Central Bank interest rates will lead to the appreciation of the euro, which will spread the weakness of the Swiss franc to other currency pairs, such as the US dollar/On the Euro.

Mergers and acquisitions activities

The main industries in Switzerland are banking and finance. Mergers and acquisitions, namely buying and selling companies, are very common.

How does this affect the current price change of the Swiss franc?

For example, if a foreign company wants to merge a Swiss company, it needs to pay the transaction fee in Swiss francs. On the other hand, if a Swiss bank wants to buy an American company, it needs to sell Swiss francs and buy US dollars.

dollar/Swiss franc trading

dollar/The Swiss franc trading volume is measured in US dollars. A standard hand is10Ten thousand dollars, the mini hand is1Ten thousand US dollars.

Each point's value is measured in Swiss francs and in US dollars/Every point of the Swiss franc(Four decimal places make up one point)Value calculation.

Gains and losses are priced in Swiss francs. For a standard hand, the change value of each point is10 Swiss franc. For a mini hand, the variation of each hand is1 Swiss franc. For example, in US dollars/The current exchange rate of the Swiss franc is1.0600So, the value of a standard in one's hand is9.4340USD.

The calculation of margin trading is based on US dollars. stay100:1Under leverage, trading100,000USD in USD/Swiss franc, we need it1,000USD.

dollar/Swiss franc trading techniques

Swiss franc currency pair(dollar/Swiss franc and euro/Swiss franc)Usually only active during European trading hours. The two currency pairs are mostly adjusting sideways. Considering this, they are likely to suddenly rise or fall.

As we mentioned earlier, the Swiss Central Bank places great emphasis on monitoring the valuation of the Swiss franc. The Swiss central bank is notorious for intervening in the foreign exchange market, especially when the Swiss franc reaches certain important levels, weakening its value.

For example, if the US dollar/The Swiss franc has fallen to its lowest level in a year due to increased risk appetite, and the Swiss central bank will secretly push up the price of this pair of currencies.

When trading in Swiss francs, you need to pay attention to changes in the basic economic data of its main trading partner, the eurozone. The economic or political tensions in the eurozone will lead investors back to the safe haven of the Swiss franc.

Considering this, cross currency pairs such as the euro can also be utilized/Using changes in the Swiss franc trend to assess the US dollar/Swiss franc trading. Raising interest rates by the European Central Bank will push up the euro/The Swiss franc, its effect will also spread to the US dollar/Swiss franc trading in progress.