- The USD/CHF attracts some purchases in the fall on Thursday in the midst of a combination of support factors.
- A positive risk tone weakens the CHF and supports the torque in the middle of a modest rebound of the USD.
- Commercial nerves and bets for feat cuts of the Fed could stop the bulls when opening aggressive positions.
The USD/ChF pair bounces some pips from a new weekly minimum reached during the Asian session on Thursday and, for now, it seems to have stopped the fall of this week since the proximity of the psychological brand of 0.8000. However, cash prices lack bullish conviction and currently quote around the region of 0.7940, without changes in the day in mixed signals.
Asian actions followed the upward movement in the US Variable Income Markets, which, in turn, weakens the demand for the Swiss Franco (CHF) of safe refuge. The US dollar (USD), on the other hand, receives some support from the decreasing probabilities of a rate cut by the Federal Reserve (Fed) in July and turns out to be another factor that acts as a tail wind for the USD/CHF torque.
However, the minutes of the FOMC meeting of June 17-18 published on Wednesday left the door open to more interest rate cuts by the end of this year. This could stop the USD uprisers when opening aggressive positions. In addition, trade uncertainties could limit any optimism in the markets and contribute to stop the USD/CHF torque potential.
In fact, the president of the USA, Donald Trump, issued tariff notices to eight minor business partners on Wednesday and said there will be no extensions for countries that receive letters. In addition, Trump emphasized that any retaliatory tax will be added to existing US tariffs and also announced that the 50% tariff on copper imports will enter into force on August 1.
This, in turn, makes it prudent to wait for a strong shopping monitoring before positioning itself for the resumption of the recent USD/CHF pair from the 0.7870 region, or the lowest level since September 2011 reached last week. The operators now expect the publication of the initial weekly applications of US unemployment subsidy and the Speeches of FOMC influential members to obtain a new impulse.
Swiss Franco – Frequently Questions
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.
