- The USD/CHF struggles to attract buyers while betting for a feat cut of the Fed in July weighs strongly on the USD.
- The stop the fire between Israel and Iran further undermines the status of the USD as a global reserve currency.
- The bearish operators seem reluctant before the testimony of the president of the FED, Jerome Powell, before the Congress.
The USD/CHF pair remains depressed for the second consecutive day and falls to a minimum of more than a week during the Asian session on Tuesday in the middle of a US dollar (USD) in general weaker. However, cash prices lack continuation sales and manage to stay above the 0.8100 brand.
The operators increased their bets due to a possible cut of interest rates by the Federal Reserve (FED) in July after the publication of mixed data of the US PMISs and moderate tone comments of influential members of the FOMC on Monday. Apart from this, the optimism generated by the announcement of the US president, Donald Trump, that Israel and Iran had agreed to high the fire, undermines the status of the dollar as a global reserve currency.
The Swiss Franco (CHF), on the other hand, receives support from the Swiss National Bank (SNB) signal that it does not plan more interest rate cuts, which disappointed some investors who expected the rates to return to negative territory this year. This, in turn, acts as a wind against for the USD/CHF torque. In addition, the rupture during the night below the support of 0.8150 supports the possibility of new intradic losses.
However, the operators seem reluctant to carry out aggressive addresses and choose to wait for signs about the future trajectory of features of the Fed. Therefore, the attention remains focused on the speeches of several members of the FOMC and the testimony of the president of the FED, Jerome Powell, before the Congress. Apart from this, the US Consumer Trust Index of the Board Conference will boost the USD and will provide a certain momentum to the USD/CHF torque.
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.
