- The USD/CHF precautions about 0.8200, while investors expect the key NFP data from the US NFPs for May.
- The disappointing US employment data and the US ISM services PMI for May have hit the US dollar.
- The Swiss CPI contracted 0.1% in May, raiding the way for more interest rate cuts by the SNB.
The USD/ChF pax is quoted near the minimum of six weeks around 0.8200 during the last negotiation hours in Asia on Thursday. Investors are preparing for significant volatility in the torque as the United States Non -Agricultural Payroll (NFP) data (USA) occupies the center of the stage, which will reflect the current state of the labor market.
The US dollar (USD) fell sharply on Wednesday after the publication of a series of disappointing US economic data for May, remarkably a strong deceleration in the labor demand of the private sector. ADP employment change data showed that the private sector added 37,000 new workers, the lowest reading from the COVID era in February 2021.
In addition, the weak PMI of services and the increase in supplies costs in the service sector, which represents two thirds of the total economic activity, have generated risks of stagning. According to the USS PMI reports of the US ISM, activities in the sector fell unexpectedly, and the subcomponent paid prices grew at a faster rate. The scenario of increased input costs and contraction in business activity often leads to stagflation.
In the commercial front, investors look for new clues about trade negotiations between Washington and Beijing. On Wednesday, the comments of the president of the US, Donald Trump, in a publication on Truth.Social, pointed out that commercial negotiations with Chinese leader Xi Jinping will not be easy. “I like President XI of China, I have always liked it and I will always like it, but it is very hard and extremely difficult to make an agreement with him !!!” Trump wrote.
In the Swiss region, the deflation scenario has raised the expectations of an interest rate cut by the Swiss National Bank (SNB) at the Monetary Policy Meeting of June 19. On Tuesday, the data showed that the Swiss consumer price index (CPI) contracted 0.1% year -on -year, as expected, in May after remaining flat in April.
The president of the SNB, Martin Schlegel, already warned in an event in Basel in the last week of May that Swiss inflation could enter negative territory, Reuters reported. However, it ruled out the expectations that short -term inflationary setbacks could lead to adjustments in monetary policy, stating that the Central Bank is more focused on maintaining medium -term price stability.
“Even negative inflation figures cannot be ruled out in the coming months,” said Schlegel and added, “SNB does not necessarily have to react to this.”
US dollar FAQS
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.
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