- The USD/CHF rises to about 0.8125 in the early European session on Monday.
- The optimistic feeling index of the Michigan consumer supports the US dollar.
- The Fed is expected to maintain interest rates without changes in the June meeting on Wednesday.
The USD/CHF pair gains strength to around 0.8125 during the early European session on Monday, driven by the rebound in the US dollar (USD). Investors expect the production and import prices of Switzerland and the economic projections of Seco, which will be published later on Monday.
The economic data of the US of Friday, stronger than expected, raise the US dollar against the Swiss Franco (CHF). The consumer’s feeling index of the University of Michigan improved 60.5 in June, compared to 52.2 in the previous reading. This reading was stronger than the 53.5 expected.
Meanwhile, the American dollar index (DXY), an index of the value of the US dollar (USD) measured against a basket of six world currencies, is recovered to about 98.25, adding 0.15% in the day.
The US Federal Reserve Policy Meeting (FED) will take a central place later on Wednesday. It is anticipated that the US Central Bank maintain stable interest rates at its June meeting. Future markets expect two rates cuts for the end of the year, possibly starting in September, backed by softer inflation data last week.
Investors fear that the conflict between Israel and Iran can climb to a broader regional conflict. This, in turn, could boost shelter license such as ChF and create a wind against for the pair. Israel began attacks against Iran on Friday, aiming at nuclear facilities and missile factories and killing military leaders. At the last minute of Sunday, Iran launched a new attack against Israel, with an explosion seen in the coastal city of Haifa.
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 Although the link is no longer in force, the fate of the Swiss Franco tends to be highly correlated with that of the euro due to the high dependence of the Swiss economy of neighboring Eurozone.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.
