- The USD/CHF depreciates in the midst of a greater demand for safe refuge after the increase in concerns about slow growth and renewed inflation in the US.
- Trump plans to increase import tariffs from 25% to 50% to ensure the US steel industry.
- It is widely expected that the Swiss National Bank takes the interest rate to zero at the June monetary policy meeting.
The USD/CHF continues its loss streak per third consecutive session, quoting around 0.8210 during the Asian hours of Monday. The torque loses ground since the US dollar (USD) can face challenges amid growing concerns about slow growth and renewed inflation in the United States (USA). The US president, Donald Trump, threatened to double import tariffs on steel and aluminum, increasing them at 50% from 25%.
In addition, the Swiss Franco (CHF) receives support from the greatest demand for sure refuge after the decision of the US Court of Appeals for the Federal Circuit in Washington, which on Thursday temporarily allowed Trump’s tariffs to enter into force. The decision has reverted a ruling on Wednesday made by a panel of three judges in the International Trade Court in Manhattan that arrested Trump to impose “Liberation Day” tariffs.
The operators maintain their attention in the monetary policy perspectives of the Swiss National Bank (SNB), with extensive expectations for cutting rates to zero at the June monetary policy meeting. The risks of deflation in the Swiss economy remain a key concern, with the general IPC flat year -on -year in April and the underlying inflation reducing 0.6% from 0.9%.
The dollar index (DXY), which measures the value of the US dollar compared to six main currencies, is quoted about 99.20 at the time of writing. The operators will probably observe the Index of Purchasing Managers (PMI) EE.UU.UU manufacturing ism for May, which will be taken into account later in the North American session.
The president of the United States, Donald Trump, said Friday that he planned to increase import tariffs on steel and aluminum, which could increase pressure on global steel producers and intensify the commercial war. “We are going to impose an increase of 25%. We will take it from 25% to 50% – the tariffs on steel that enter the United States, which will even more ensuring the steel industry in the US,” he said, according to Reuters.
Franco Swiss faqs
The Swiss Franco (CHF) is the official currency of Switzerland. It is among the ten most negotiated coins worldwide, reaching volumes that far exceed the size of the Swiss economy. Its value is determined by the general feeling of the market, the country’s economic health or the measures taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franco was linked to the euro (EUR). The link was eliminated abruptly, which resulted in an increase of more than 20% in the value of the Franco, which caused a turbulence in the markets. Although the link is no longer in force, the fate of the Swiss Franco tends to be highly correlated with that of the euro due to the high dependence of the Swiss economy of neighboring Eurozone.
The Swiss Franco (CHF) is considered a safe shelter asset, or a currency that investors tend to buy in times in markets. This is due to the perception of Switzerland in the world: a stable economy, a strong export sector, great reserves of the Central Bank or a long -standing political position towards neutrality in global conflicts make the country’s currency a good option for investors fleeing risks. It is likely that turbulent times strengthen the value of the CHF compared to other currencies that are considered more risky to invest.
The Swiss National Bank (BNS) meets four times a year (once each quarter, less than other important central banks) to decide on monetary policy. The bank aspires to an annual inflation rate of less than 2%. When inflation exceeds the objective or it is expected that it will be overcome in the predictable future, the bank will try to control the growth of prices raising its type of reference. The highest interest rates are usually positive for the Swiss Franco (CHF), since they lead to greater returns, which makes the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the CHF.
Macroeconomic data published in Switzerland are fundamental to evaluate the state of the economy and can affect the assessment of the Swiss Franco (CHF). The Swiss economy is stable in general terms, but any sudden change in economic growth, inflation, current account or foreign exchange reserves have the potential to trigger movements in the CHF. In general, high economic growth, low unemployment and a high level of trust are good for Chf. On the contrary, if the economic data suggests to a weakening of the impulse, the CHF is likely to depreciate.
As a small and open economy, Switzerland depends largely on the health of the neighboring economies of the Eurozone. The European Union as a whole is the main economic partner of Switzerland and a key political ally, so the stability of macroeconomic and monetary policy in the Eurozone is essential for Switzerland and, therefore, for the Swiss Franco (CHF). With such dependence, some models suggest that the correlation between the fate of the euro (EUR) and the Swiss Franco is greater than 90%, or almost perfect.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
