- The USD/CHF attracts some buyers about 0.7975 in the early hours of Wednesday’s European session.
- Trump said a 50% tariff on copper imports is coming and threatened to leaf about pharmaceutical products.
- The publication of FOMC minutes will be the center of attention later on Wednesday.
The USD/CHF torque gains strength around 0.7975 during the first hours of Wednesday’s European session, backed by an American dollar (USD). However, concerns about renewed commercial tensions caused by US President Donald Trump could limit the torque potential. All eyes will be placed in the FOMC minutes, which will be published later on Wednesday.
Trump said Tuesday night that he would not offer any additional extension about specific tariffs per country, although the previous day he had not allowed him not “100% firm” on his deadline on August 1. In addition, Trump indicated that he could announce new substantial rates on copper imports and pharmaceutical products.
The persistent threat to inflation by tariffs could convince the US Federal Reserve of not cutting interest rates until next year, which supports the dollar against the Swiss Franco (CHF). Markets now anticipate rate cuts of 50 basic points (PBS) by the Fed by the end of this year, starting in October.
The conflict in Gaza continues, with dozens of dead Palestinians while Israel unleashes more mortal attacks. Meanwhile, Israeli Prime Minister Benjamin Netanyahu is visiting Washington and has met Trump in the White House. There are speculations that the fire could be moved. However, any sign of climbing of geopolitical tensions in the region could increase safe refuge flows, supporting the CHF.
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 Although the link is no longer in force, the fate of the Swiss Franco tends to be highly correlated with that of the euro due to the high dependence of the Swiss economy of neighboring Eurozone.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.
