- The attempts to fall from the US dollar remain limited above 0.8100, maintaining the maximum of 0.8150 at a short distance.
- Solid GDP and employment data in the US and a hard line Fed gave an additional impulse to the dollar on Wednesday.
- Later today, it is expected that the PCE inflation data in the US supports the “highest longer” position of the Fed.
The US dollar maintains its tone of purchase intact against the Swiss Franco, holding profits after a rally of almost 3% in recent days. The fall attempts seen above on the day have been contained above 0.8110, and the torque cuts losses before the PCE price index report, approaching a maximum of four weeks, at 0.8150
The dollar recovered on all fronts on Wednesday, after the Federal Reserve maintained its reference interest rate without changes and discouraged the hopes of upcoming rates. The president of the FED, Jerome Powell, reiterated his “patience” rhetoric, assessing that the impact of tariffs could take months to demonstrate.
The Swiss Franco showed a slight recovery in the early European session, since Swiss retail sales exceeded expectations, with an increase of 3.8% in June, after a 0.3% revised reading reading in May. However, the reaction was short.
US solid data and a hard line power driver drive the USD
The previous macroeconomic publications supported the position of the US Central Bank, since the US GDP exceeded expectations, despite the fall in the investment of the private sector and relatively soft consumer spending figures.
Also on Wednesday, the employment figures of ADP exceeded expectations with an increase of 104,000 in net private payrolls in July, well above the increase of 78,000 predicted by market analysts and reversing a 23,000 drop in June.
The dollar bassists remain controlled on Thursday with all eyes placed in the figures of the July PCE index. The general inflation is expected to have accelerated to 2.5% year -on -year, from the previous 2.3%, with the price index of the stable underlying PCE in 2.7%. In general, the figures are consistent with the vision of “higher for a longer time” of the Fed and in general they are favorable for the USD.
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.
