- The USD/CHF bulls remain outside the lack of a significant purchase interest in the USD.
- The sustained demand for sure refuge supports the CHF and also helps to limit the main torque.
- Operators seem reluctant to open aggressive directional positions before the CPOC meeting.
The USD/CHF torque struggles to capitalize on a modest rebound in the Asian session and is currently near the lower limit of its daily range in a moderate American dollar pricing action (USD). However, cash prices manage to stay above the level of 0.8200 while operators choose to wait for the result of a two -day FOMC monetary meeting that begins later today.
The Federal Reserve (FED) is scheduled to announce its decision on Wednesday and is widely expected to maintain stable interest rates. In addition, the operators have reduced their bets that the Fed will cut rates in June after the encouraging US employment data on Friday and the US ISM PMI services better than expected on Monday. Therefore, the attention will focus on the accompanying policy statement and the comments of the president of the FED, Jerome Powell, on the press conference after the meeting. Investors will seek clues about the trajectory of feat cuts from the Fed, which, in turn, will boost the USD and provide a significant impulse to the USD/CHF torque.
Meanwhile, the growing economic uncertainty led by the erratic commercial policies of US President Donald Trump fails to help USD attract significant buyers. In addition, the persistent geopolitical risks derived from the prolonged war between Russia and Ukraine and the conflicts increasing in the Middle East Eclipsan the recent optimism generated by relaxation signals in commercial tensions between the US and China. This, in turn, is considered to give some support to the Swiss Franco (CHF) of safe refuge and contribute to limit the uprising potential of the USD/CHF torque. However, bearish operations seem reluctant before the risk of key events of central banks.
Therefore, it will be prudent to expect a sustained break and an acceptance below the round figure of 0.8200 before confirming that the recent recovery from the 0.8040 region, or the lowest level since September 2011 reached last month, has run out of impulse. On the contrary, the bulls could wait a movement beyond the congestion zone of 0.8300-0.8330 before positioning themselves for any additional upward movement in the short term.
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.
