- The USD/CHF quotes down about 0.7965 while the US dollar struggles to extend its upward movement.
- An improvement in the hopes of a commercial agreement between the US and the EU has limited the bullish potential of the US dollar.
- The prices of Swiss producers and imports decrease per second consecutive month.
The USD/CHF pair drops to about 0.7965 during the European trading session on Monday. The Swiss frank torque and the US dollar (USD) falls slightly while the US dollar goes back while fighting to extend its upward movement amid the hopes that the United States (USA) and the European Union (EU) can reach a commercial agreement before the deadline of August 1.
The US dollar index (DXY), which tracks the value of the dollar against six main currencies, shown slowly 97.85.
The hopes of a possible commercial agreement between the US and the EU have increased since President Donald Trump has confirmed that the 27 -nations block is still in conversations with Washington to reach an agreement.
During the weekend, concerns about global trade were revived after sending letters to the EU and Mexico, dictating 30% tariffs that will be separated from sector levies and warning that any reprisal measure will be answered with an additional increase in import rights.
Meanwhile, the Swiss Franco (CHF) remains in general stable despite the fact that a decrease in the prices of Swiss producers and imports has generated expectations that the Swiss National Bank (SNB) could bring interest rates to negative territory.
US Dollar – Frequently Questions
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values that overcome in new purchases. It is usually positive for the US dollar.
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.
