The start of today’s European market session saw data releases in Australia and Switzerland with potential to affect the prospects for the Swiss Franc in particular, and possibly also the Australian Dollar.
Australian GDP Climbs 2.1%, Highest Since 2023
Australian GDP for the third quarter recorded a solid gain of 2.1% year-on-year. This was just shy of the market estimate of 2.2% and marked the strongest expansion since the third quarter of 2023. GDP for Q2 was upwardly revised to 2.0% from 1.8%, pointing to stronger growth.
The robust gain in Q3 was driven by strong private investment and consumer spending. Private investment hit its fastest pace since 2021, led by stronger business investment. Consumer spending was strong, driven by food, electricity, rent and healthcare.
On a quarterly basis, GDP expanded 0.4%, missing the market estimate of 0.7% and down from the revised Q2 reading of 0.7%. Still, investors liked what they saw and the Australian dollar has posted gains for a ninth successive day.
The strong GDP data is hotter than the Reserve Bank of Australia (RBA) would like to see. Australian inflation hit 3.8% year-on year in October, a seven-month high and well above the RBA’s target band of 2-3%. The RBA meets next week and while the most likely scenario is a hold in rates, the central bank could surprise with a rate hike in order to cool inflation.
Australian Dollar, Stock Market Post Modest Gains
Today’s GDP has sent the Australian dollar slightly higher. The AUD/USD currency pair has risen 0.21% and is trading at $0.6572. The Aussie is on an impressive tear and this currency pair has climbed by 1.9% since November 21st.
The benchmark Australian index, the S&P/ASX 200 closed slightly higher on Wednesday, rising 15.50 points (0.18%) to close at 8,595 points.
Swiss Inflation Negative in November, Worrying the SNB
Switzerland’s consumer price index (CPI) dipped to zero in November year-on-year, down from 0.1% in October and missing the market estimate of 0.1%. This marked the lowest inflation rate in six months. On a monthly basis, CPI fell 0.2%, following a 0.3% decline in October and matching the market estimate. Core CPI, which excludes food and energy, rose by 0.4%, the lowest level since August 2021.
The Swiss National Bank (SNB) won’t be happy with today’s inflation numbers. The SNB’s inflation target band is 0%-2% and does not want to see inflation below zero. The SNB had projected that inflation would rise in the third quarter to 0.4%, but that forecast is likely to materialize after today’s soft numbers.
The SNB meets next week and is expected to hold rates at 0%, despite the lower-than-expected CPI release, as the central bank is reluctant to return to negative interest rates. SNB President Martin Schlegel said in November that “the bar is high” for a rate cut into negative territory, meaning that the central bank will likely play a ‘wait and see’ game, hoping that inflation can recover in early 2026.
Swiss Franc, Stock Market Higher
The USD/CHF currency pair has edged lower on Wednesday, rising by 0.15% and currently trading at 0.8017.
The Swiss Market Index, Switzerland’s benchmark stock index, is in positive territory early on Wednesday. The index is up 49 points (0.38%) and is trading at 12,939.
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