- The recovery of the US dollar loses impulse in a sleepy market session and gives daily profits.
- The pair was appreciated on Thursday after the strong activity in services and the figures for unemployment applications.
- The recent US data confirms the resilience of the labor market and practically rule out a FED cut next week.
The recovery of the US dollar from minimums of several weeks against the Swiss Franco, at 0.7910, has failed to gain significant acceptance above 0.7965 and retreated in the first session of the European market, leaving the par virtually unchanged in the daily chart.
The dollar shot Thursday after business activity data in the US exceeds expectations, led by an improvement in the services sector significantly greater than expected that compensated the unexpected contraction in manufacturing activity.
At the same time, the US Department of Labor Department revealed that unemployment insurance requests fell for sixth consecutive week, to 217,000 last week, since 221,000 in the previous week, against the market consensus, which had anticipated an increase to 227,000.
These figures support the “wait and see” position of the president of the FED, Powell, and practically discard a feat of fees after the Fed meeting next week.
Also on Thursday, an unusual visit of the president of the United States, Trump, to the Federal Reserve ended without major incidents, apart from some criticisms about the renewal costs of the bank’s headquarters and traditional pressures to lower interest rates.
Apart from that, Trump said he does not plan to say goodbye to Powell, because that would be “a great movement” and “unnecessary”, a possibility that had worried the markets in recent weeks and increased concerns about the independence of the Central Bank.
Swiss Franco – Frequently Questions
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 Although the link is no longer in force, the fate of the Swiss Franco tends to be highly correlated with that of the euro due to the high dependence of the Swiss economy of neighboring Eurozone.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.
