Forex News –Swiss economy heading to recession

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Forex News: Swiss Franc makes a new record high against EuroThe KOF economic barometer, known as Switzerland’s leading indicator for growth was released today, falling below zero for the first time in over two years.

The index is designed to predict the direction of the economy over the following six months and is based on a combination of twelve economic indicators related to banking confidence, production, new orders, consumer confidence and housing.

The fact that it fell into negative territory for the first time since 2009 and posted its eighth consecutive  monthly drop, gives a clear indication that the Swiss economy is heading into a recession.

The reading came in much lower than expected and fell to -0.17 points in January, its lowest level since August 2009, more than the forecast of an average drop to -0.05. The previous indicator in December was recorded at 0.01, also lower than the previous.

A surge in the Swiss franc due to investors seeking  a safe haven from the escalating euro zone debt crisis has weighed on Swiss exports and local company profits.

The weak data raises concern that the Swiss National Bank may want to intervene and change the euro-franc cap, which is at 1.20 CHF at the moment. Some expect at least a verbal intervention from the SNB.

The franc weakened after the data was released. EURCHF jumped to a high of 1.2084 from 1.2060.