- The USD/CHF remains weak around 0.8810 in the early European session on Thursday, lowering 0.15% in the day.
- The US CPI data were softer than expected in February.
- The operators expect the US IPP inflation data, which will be published later on Thursday.
The USD/CHF pair softens about 0.8810 during the early European session on Thursday. The fear that the protectionism of US President Donald Trump pushes the US economy towards a recession drags the US dollar (USD) down against the Swiss Franco (CHF). Investors will take more signs of the US Production Price Index (IPP) index of February and initial weekly applications for unemployment, which will be published later on Thursday.
Inflation in the US, measured by the Consumer Price Index (CPI), was reduced to 2.8% year -on -year in February from 3.0% in January, softer than the 2.9% estimate, the Labor Statistics Department reported Wednesday. Meanwhile, inflation of the underlying IPC, excluding volatile food and energy categories, decreased to 3.1% in February from 3.3% of the previous month.
In monthly terms, the US General CPI increased 0.2% in February after a strong 0.5% advance in January, softer than the expectation of 0.3%. The underlying IPC, excluding the volatile food and energy categories, rose 0.2% during the same period reported compared to the previous 0.4%.
With the economic perspectives deteriorating due to tariffs, the US Federal Reserve (Fed) is expected to resume fees in June after having paused its flexibility cycle in January. This, in turn, could continue weakening the dollar in the short term.
In addition, the growing demand for safe refuge amid the growing concerns about global economic conditions and geopolitical tensions in the Middle East could boost the Swiss Franco (CHF) and create an obstacle to the USD/CHF. A huti spokesman said Tuesday night that they will attack any Israeli ship that violates the group’s ban on Israeli ships passing through the red and Arabic seas, the Bab al-Mandab Strait and the Gulf of Adén, with immediate effect.
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.
