- The Swiss Franco extends his profits against the US dollar as geopolitical tensions relieve after a fragile high fire between Iran and Israel.
- The USD/CHF is quoted just above its lowest levels since 2011, pressured by safe refuge flows and a weaker American dollar.
- The president of the Fed, Powell, says that “many roads are possible” for US rates, keeping a cut in July on the table if the data allowed.
The Swiss Franco (CHF) is negotiated stronger against the US dollar (USD) on Tuesday, building on Monday’s earnings in the midst of a weaker dollar while geopolitical tensions are relieved after a high fire agreement between Iran and Israel. Although the fire has been declared and accepted, the situation remains fragile and highly tense, with Iran and Israel accusing each other of raping the truce. This persistent uncertainty keeps cautious investors and sustains the demand for traditional currency of safe refuge such as the Swiss Franco, even when the immediate fears of a broader escalation have decreased.
Reflecting this cautious mood, the USD/CHF pair remains just above its lowest levels since 2011, quoting about 0.8052 at the time of writing during US negotiation hours, although it has not yet managed to break that long -term minimal. A weaker US dollar and the persistent demand for safe refuge for the Franco continue to weigh on the torque, despite the last efforts of the Swiss National Bank (SNB) to stop the strength of the currency when returning to a zero rate policy.
Last week, the SNB monopolized headlines with its sixth cuts of consecutive rates, carrying its key policy rate back to zero while policy managers change against fighting inflation to address emerging deflation risks. Recent data showed that consumer prices fell into negative territory in annual terms, partly because the strong Franco maintains the cheapest imported goods. Underlining its flexible posture, the SNB promised to “adjust our monetary policy if it is necessary” after ending a period of less than three years with positive indebtedness costs. However, a Bloomberg survey reveals a division between the forecasts: only seven sixteen expect SNB to take the fees to negative territory in the next September or December meetings, while the rest anticipates that there will be no more changes. This suggests that SNB is not in a hurry to cut more rates for now, a position that continues to support Franco’s resilience.
Adding to the weakness of the dollar, the testimony of the president of the Federal Reserve (Fed), Jerome Powell, on Tuesday reinforced a cautious but open tone on the monetary policy of the USA. Inflation is softened faster than expected. Powell also emphasized that the Fed “would not hesitate to act” if the labor market shows signs of tension.
Supporting this vision, Vice President Michelle Bowman and Governor Christopher Waller had already pointed out a more moderate inclination, with Bowman pointing to “encouraging signs” about the progress of inflation and Waller warning that it would be “little prudent to wait too much” if economic conditions show signs of softening. His previous comments helped to shape market expectations for a short -term policy relief. This combination of cautious optimism and flexibility in politics keeps the dollar on the defensive, increasing the attractiveness of the Swiss Franco.
Swiss economy FAQS
Switzerland is the largest economy in the European continent in terms of gross domestic (GDP) nominal. If measured by GDP per capita (a wide measure of the average standard of living), the country is among the highest in the world, which means that it is one of the richest countries in the world. Switzerland tends to be in the first places of world classifications on standard of living, development, competitiveness or innovation rates.
Switzerland is an open and free market economy based mainly on the services sector. The Swiss economy has a strong export sector and the neighboring European Union (EU) is its main commercial partner. Switzerland is an important watches exporter and houses important companies in food, chemistry and pharmaceutical industries. The country is considered an international fiscal paradise, with corporate tax rates and significantly low income compared to its European neighbors.
As a country of high income, the growth rate of the Swiss economy has decreased in recent decades. Even so, its political and economic stability, its high levels of education, top -level companies in various industries and their fiscal paradise status have made it a preferred destination for foreign investment. This has generally benefited the Swiss Franco (CHF), which has historically remained relatively strong in front of its main monetary pairs. In general, a good performance of the Swiss economy – based on high growth, under unemployment and stable prices – tends to appreciate the CHF. On the contrary, if the economic data suggests to a weakening of the impulse, the CHF is likely to depreciate.
Switzerland is not an exporter of raw materials, so, in general, their prices are not a key factor for the Swiss Franco (CHF). However, there is a slight correlation with gold and oil prices. In the case of gold, the condition of the CHF as an active refuge and the fact that the currency used to be backed by the precious metal means that both assets tend to move in the same direction. In the case of oil, a document published by the Swiss National Bank (SNB) suggests that the increase in oil prices could negatively influence the assessment of the CHF, since Switzerland is a net fuel importer.
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.
