E-mail:    

CURRENCY ANALYSIS

CAD/CHF: Distillation

CADCHF, Distillation, EUR, CHF, USD, CAD , Currency Analysis, fx trader, forex

20 Apr 2016

 

Slightly less than 0.40% of Canada’s exports are destined for Switzerland and conversely, less than 0.90% of imports originate from Switzerland. By far, Canada’s largest trade partner is the United States, and Switzerland, equally by far, is the European Union. Consequently, both Canada’s and Switzerland’s respective economies are highly dependent on their largest trade partners. It then may be said that the relative value of the Canadian Dollar is largely a function of the US Dollar and the relative value of the Swiss Franc is largely a function of the Euro.

Although different in structure and composition, the national economies of Switzerland and Canada are essentially export dependent. Canada’s total economy is heavily dependent on industrial commodity exports as well as its shared manufacturing trade with the US. The Bank of Canada must, at the very least, consider maintaining a trade weighted parity with the US Dollar. Switzerland’s economy is mainly services, pharmaceuticals and both consumer discretionary and non-discretionary products. Likewise, the Swiss economy (quite emphatically) strives to maintain a trade weighted parity with the EU.

This is where the similarities end, for the BOC is able to focus its policy on the Canadian economy, and has had absolutely no problem maintaining a weaker Loonie vs the US Dollar; it literally can’t be helped. Switzerland, on the other hand, can’t seem to shake off a tsunami of capital inflows, forcing the SNB to undertake a deep negative key policy rate, -0.75% and intervening in currency markets in order to stem the capital inflow tide which keeps the Franc relatively strong. Both central banks have clearly stated the intent of policy actions.

CADCHF, Distillation, EUR, CHF, USD, CAD , Currency Analysis, fx trader, forex EUR CHF USD CAD Comparison ChartEUR CHF USD CAD Comparison Chart

Next>>