The Swiss National Bank's decision Thursday to let the the Swiss currency float freely against the Euro has stunned watchmakers across the country. The likely short-term impact is rising Swiss watch prices as the Franc strengthens against the Euro. Since the announcement, the Franc has increased 15 percent relative to the Euro.
Swiss watchmakers are especially vulnerable to a stronger franc because at least 50 percent of the value of their watches must be made at home to qualify for the coveted "Swiss-made" label. Beginning January 1, 2017, that requirement will be tightened to at least 60 percent Swiss made.
Swatch Group CEO Nick Hayek describes the move as a "a tsunami" for Switzerland and its export-led economy.
Some 95 percent of Swiss-made watches are exported, with many of its strongest markets in neighboring countries.
We are very anxious," said Jean-Daniel Pasche, president of the Swiss watchmakers’ federation. "We expect all kinds of difficulties."
This is the latest in a string of bad news for the industry in recent months following pressure from China's slow-down and months of disruptive protests in Hong Kong, the largest market for Swiss watches.