- The USD/CHF struggles to gain significant traction in the middle of a combination of divergent forces.
- Thursday’s SNB decision supports the CHF and the Fed hard line pause supports the USD.
- The mixed fundamental background justifies some caution before making directional bets.
The USD/CHF torque lacks an intra -firm directional bias on Friday and oscillates within a narrow range, just above 0.8100 during the first half of the European session. However, cash prices, for now, seem to have arrested Thursday’s decline falling from levels just above the 0.8200 brand, or more than a week.
The Swiss Franco (CHF) receives some support from the hard line perspective of the Swiss National Bank (SNB), which indicates that it does not plan additional cuts in interest rates. The announcement disappointed some investors who expected the rates to return to negative territory this year, which, together with the increase in geopolitical tensions in the Middle East, benefits the ChF of safe shelter and acts as a wind against for the USD/Chf torque.
The US dollar (USD), on the other hand, remains defensive, although it is still on its way to registering weekly profits thanks to the hard line signals of the Federal Reserve (Fed) earlier this week. In fact, the Fed maintained the forecast of two rates cuts in 2025, but cut the perspective of cuts in 2026 and 2027. This acts as a tail wind for the dollar and, in turn, is considered to act as a tail wind for the USD/CHF torque.
In the face of the future, the operators now expect the publication of the manufacturing index of the Fed of Philadelphia and the Fed monetary policy report, which could influence the USD price dynamics. In addition, developments around the Israel-Irus conflict will boost the feeling of market risk in general and the CHF of safe refuge. This should help generate short -term trading opportunities around the USD/CHF torque.
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.
