- The USD/CHF moves up to 0.8770 in the Asian session on Wednesday.
- Investors expect Fed policy ads on Wednesday.
- SNB is expected to reduce its key interest rate at 25 basic points on Thursday to 0.25%.
The USD/CHF torque gains ground to around 0.8770 during Wednesday’s Asian session, driven by the renewed demand of the US dollar. The Federal Reserve Interest Decision (FED) of the US will be the Center for Care on Wednesday, without changes in the expected rate. The attention will be transferred to the Swiss National Bank Meeting (SNB) later on Thursday.
The market consensus suggests that the FED will maintain its federal fund rate without changes in the current range of 4.25% to 4.50%. The operators will focus on the press conference and the Summary of Economic Projections (SEP), or ‘Point Graph’, to obtain more clues about the future trajectory of interest rates and economic perspectives. Any hard line comments from Fed officials could raise the US dollar against the Swiss Franco (CHF) in the short term. According to the CME Fedwatch tool, the possibility of a rate reduction at the May meeting has increased to 25% from 18% a month ago.
It is anticipated that the Swiss National Bank (SNB) cuts its main policy rate in a percentage quarter to 0.25% and keep it there up to at least 2026, according to most economists surveyed by Reuters. “The only significant uncertainty about the opinion that SNB maintains stable rates in this meeting, for me, comes from a certain darkening of the global growth perspective,” said Claude Maurer, chief economist of Bak Economics based in Basel.
Meanwhile, US president Donald Trump, and Russian President Vladimir Putin, agreed on Tuesday an immediate pause in attacks against energy infrastructure in the Ukraine War. However, Putin refused to sign the high -year fire that Trump’s team recently worked with the Ukrainians in Saudi Arabia. The operators will be attentive to the developments around the high the full fire between Russia and Ukraine. The growing geopolitical tensions in the Middle East and the ongoing conflict between Russia and Ukraine could boost the flows to safe refuge assets, benefiting the CHF.
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.
