- The USD/CHF struggles to gain significant traction on Wednesday in the middle of mixed signals.
- A modest rebound of the USD and a positive risk tone act as wind against for the currency pair.
- Fed feature clippages of fees limit USD profits and cash prices in the mid -line signal of the SNB.
The USD/CHF torque is consolidated in a narrow range above the 0.7900 mark during the Asian session on Wednesday and remains close to its lowest level since September 2011 reached the previous day.
The US dollar (USD) rises slightly and seeks to build on the modest rebound on Tuesday from a minimum of three and a half years. Apart from this, a positive risk tone is observed that supports the status of safe refuge of the Swiss Franco (CHF) and slows the operators to perform aggressive bearish bets around the USD/CHF torque.
Any significant appreciation of the USD, however, seems elusive following the growing acceptance that the Federal Reserve (Fed) will resume its cycle of rate cuts in the near future. In addition, concerns about the worsening of the US fiscal condition should limit the tentative recovery of the USD and the USD/CHF.
Meanwhile, the hard line signal of the Swiss National Bank (SNB) disappointed investors who expected the rates to return to negative territory this year. This favors the Alcistas of the CHF, which, together with a fundamental background background of the USD, suggests that the lower resistance path for the USD/CHF torque is down.
The operators now expect the publication of the US ADP report on employment in the private sector to obtain a new impulse later during the American session. However, the attention will remain focused on the US NFP) non -agricultural payroll (NFP) on Thursday, which will boost the USD/CHF pair in the short term.
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 Although the link is no longer in force, the fate of the Swiss Franco tends to be highly correlated with that of the euro due to the high dependence of the Swiss economy of neighboring Eurozone.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.
