- The commercial agreement between the US and China is taking shape, with Trump’s comments on a “closed agreement” raising optimism.
- The consumer inflation in the US falls in May, relieving the expectations of the Fed and limiting the profits of the US dollar on Wednesday.
- The USD/CHF is quoted below 0.8200 with US Treasury Secretary Scott Besent, testifying about Trump’s fiscal law before the deadline of July 9.
The Swiss Franco (CHF) is receiving a slight boost against the US dollar (USD) during the American session on Wednesday, with a weaker dollar promoting profits.
After the US inflation data showed signs of relief in May and trade negotiations between the US and China approached a formal agreement, concerns about US fiscal policy.
With the USD/CHF quoting below 0.8200 at the time of writing, the leadership of the US dollar is expected to continue promoting prices for the rest of the day.
The US Treasury Secretary testifies to the US House of Representatives.
With the US Treasury Secretary, Scott Besent, testifying today to the United States and Arbitration Committee of the US House of Representatives, the US fiscal policy focused on the focus of attention.
Concerns about fiscal sustainability have been raised to extend tax cuts and implement aggressive “revenge tax” aggressive tariffs.
Questions were asked about foreign investment restrictions, cybersecurity vulnerabilities and possible economic retaliation abroad.
The hearing occurs while legislators discuss a controversial package of tax cuts and tariffs designed to extend key elements of the tax reforms of 2017 and introduce new taxes, called “Revenge Tax” to companies that operate in jurisdictions with taxes on digital services or minimum global taxes.
While Besent emphasized that the package is a “fiscal bill, not a draft revenge law,” the proposals have broad implications for the sustainability of income, commercial relations and foreign investment.
US inflation falls in May, tensions between the US and China are relieved, but the fortress of the US dollar is still limited
The market approach in the European session focused on the publication of the May Consumer Price Index (CPI) and commercial conversations between the US and China held in London.
The president of the USA, Trump, confirmed that the agreement between the US and China was a “closed agreement”, improving the feeling of the market.
The US Consumer Price Index (CPI) turned out to be softer than expected on Wednesday. General inflation increased by 2.4% year -on -year in May, slightly below the 2.5% prognosis and above 2.3% in April.
The underlying IPC, which excludes food and energy, remained stable in 2.8%, without complying with the expectations of a 2.9%increase. In monthly terms, the CPI increased only 0.1%, below the 0.2%estimate, while the underlying IPC also rose 0.1%, well below the 0.3%prognosis.
FAQS risk feeling
In the world of financial jargon, the two terms “appetite for risk (Risk-on)” and “risk aversion (risk-off)” refers to the level of risk that investors are willing to support during the reference period. In a “Risk-on” market, investors are optimistic about the future and are more willing to buy risk assets. In a “Risk-Off” market, investors begin to “go to the safe” because they are concerned about the future and, therefore, buy less risky assets that are more certain of providing profitability, even if it is relatively modest.
Normally, during periods of “appetite for risk”, stock markets rise, and most raw materials – except gold – are also revalued, since they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials are strengthened due to the increase in demand, and cryptocurrencies rise. In a market of “risk aversion”, the bonds go up -especially the main bonds of the state -, the gold shines and the refuge currencies such as the Japanese yen, the Swiss Franco and the US dollar benefit.
The Australian dollar (Aud), the Canadian dollar (CAD), the New Zealand dollar (NZD) and the minor currencies, such as the ruble (Rub) and the South African Rand (Tsar), tend to rise in the markets in which there is “appetite for risk.” This is because the economies of these currencies depend largely on exports of raw materials for their growth, and these tend to rise in price during periods of “appetite for risk.” This is because investors foresee a greater demand for raw materials in the future due to the increase in economic activity.
The main currencies that tend to rise during the periods of “risk aversion” are the US dollar (USD), the Japanese yen (JPY) and the Swiss Franco (CHF). The dollar, because it is the world reserve currency and because in times of crisis investors buy American public debt, which is considered safe because it is unlikely that the world’s largest economy between in suspension of payments. The Yen, for the increase in the demand for Japanese state bonds, since a great proportion is in the hands of national investors who probably do not get rid of them, not even in a crisis. The Swiss Franco, because the strict Swiss bank legislation offers investors greater protection of capital.
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.
