- The USD/CHF tries a recovery after falling to its lowest level since July 2011, quoting about 0.7970.
- Applications for unemployment subsidy in the US fall to 227,000, exceeding expectations and marking the fourth consecutive weekly fall.
- Fed minutes reveal a cautious posture, with most officials in favor of cuts in interest rates later in the year.
The Swiss Franco (CHF) weakens against the US dollar (USD) on Thursday, since the dollar gains ground behind the data of weekly unemployment applications in the US stronger than expected, highlighting the continuous strength in the labor market. However, the growing tariff tensions maintain the feeling of the market in general cautious, with a bullish potential for the US dollar that will probably remain limited in the short term.
The USD/CHF torque is trying a modest recovery after falling to its lowest level since July 2011 earlier this month in the persistent strength of the Franco. At the time of writing, the PAR is quoted around 0.7970 during the negotiation hours in America, cutting losses of the previous two days as the recent fall attracts some buyers of opportunities. The rebound is aligned with a renewed bullish impulse in the dollar, with the US dollar index (DXY) around 97.75.
The last report of unemployment subsidy applications in the US showed that 227,000 people requested unemployment benefits last week, well below the 235,000 expected by economists. This marks the fourth consecutive weekly fall and points to a continuous strength in the labor market, even when the broader economic concerns persist. At the same time, continuous requests – a measure of the current unemployment – increased to approximately 1,965 million, the highest level since November 2021 suggesting that, although layoffs are still moderate, employment search engines are taking longer to find new positions.
The US dollar is also finding support for the decreasing expectations of an immediate rate cut, since recent labor and inflation market data suggests that the economy remains resistant. Adding to this feeling, the minutes of the meeting of June 17-18 of the Federal Reserve (FED), published on Wednesday, revealed that, although the majority of those responsible for policies anticipate rates cuts later this year, some pointed out that they could consider a relief as soon as in the July meeting if the economic conditions justify it. However, the Fed maintained a cautious posture, emphasizing that any policy movement would depend on incoming data and evolving risks, including inflationary pressures related to trade. This has led the markets to reduce the expectations of a feature cut in July, with the CME Fedwatch tool showing that operators allocate only 6.7% probability to a cut of interest rates.
In the last tariff developments, the president of the USA, Donald Trump, has postponed the implementation of new reciprocal tariffs until August 1, giving affected countries more time to negotiate reviewed commercial terms. Official letters have been sent to 21 nations so far, including Japan, Brazil and South Korea, warning of high tariffs ranging between 25% and 50% if an agreement is not reached before the deadline. Looking forward, markets will be observing the possibility of additional letters to countries that have not yet been notified, while progress in commercial negotiations, such as those involving India, China and the European Union, could influence feeling in the coming days.
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.
