- The USD/CHF remains about 0.8280 after the rally of almost 1% on Tuesday, supported by a firm US dollar.
- The DXY dollar index remains firm about 99.60 before the publication of the FOMC minutes later on Wednesday.
- The President of the SNB says that negative inflation is possible, but the central bank approach is in medium -term price stability.
The Swiss Franco (CHF) moves laterally against the US dollar (USD) on Wednesday, with the USD/CHF pair floating near the maximum of the previous day after a solid increase of almost 1% driven by the renewed fortress of the US dollar. At the time of writing, the USD/CHF torque is quoted slightly below the maximum intradic, but maintains a position above the 0.8250 psychological brand, which was last seen around 0.8275 during the European session.
Similarly, the dollar index (DXY), which measures the value of the dollar against a basket of six main currencies, remains stable. The US consumer confidence confidence data published on Tuesday added to the strength of the dollar, helping the DXY to stand firm near 99.50 before the FOMC records that will be published later in the day.
However, the demand for traditional assets of safe refuge, such as the Swiss Franco, remains supported by the persistent fiscal concerns of the US, the global commercial uncertainties ongoing and the geopolitical crisis not resolved between Russia and Ukraine.
Adding to the cautious atmosphere, the president of the Swiss National Bank (SNB), Martin Schlegel, cited the contained inflation, a strong Swiss Franco and the growing market volatility as growing risks for price stability while talking in an event in Basilea. This reinforces the provision of the Central Bank to take more measures in this regard.
Schlegel said that “even negative inflation figures cannot be ruled out in the coming months,” but added that this would not necessarily cause a policy response. “SNB does not necessarily have to react to this. Our approach is not at the current inflation rate, but in medium -term price stability,” he said.
Swiss inflation was reduced to 0.0% in April, touching the lower limit of the official target range of 0–2% SNB and reinforcing the expectations of greater monetary relief. The markets widely anticipate that the Central Bank will deliver another interest rate cut in its June 19 policy meeting, which would carry the reference rate to zero.
According to Reuters, market assessment currently reflects a 75% probability of a cut of 25 basic points (PB) to 0.00%. There is also a 25% probability that SNB can act more aggressively with a 50 -PB cut, taking the rates back to the negative territory in -0.25%.
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.
