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CFD Trading Rate US Dollar vs Swiss Franc (USDCHF)

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  • 19.07.2024 07:45
    USD/CHF rises toward 0.8900 after rebounding from four-month lows
    • USD/CHF has bounced back from its four-month low of 0.8820, which it hit on Thursday.
    • The US Dollar continues to gain ground due to increased risk aversion.
    • The Swiss Franc may struggle due to the expectations of the SNB reducing interest rates further.

    USD/CHF gains ground for the second successive day, trading around 0.8880 during the European session on Friday. The USD/CHF pair has rebounded from a four-month low at 0.8820 recorded on Thursday. This upside of the pair can be attributed to the strengthening of the US Dollar amid increased risk aversion.

    Additionally, The US Dollar is bolstered as US Treasury yields continue to improve. US Dollar Index (DXY), which measures the value of the US Dollar against the six other major currencies, trades around 104.30 with 2-year and 10-year yields on US Treasury bonds standing at 4.46% and 4.19%, respectively, at the time of writing.

    However, the upside of the USD could be potentially constrained by soft labor data, which enhances market expectations for a Federal Reserve (Fed) rate cut in September. According to CME Group’s FedWatch Tool, markets now indicate a 93.5% probability of a 25-basis point rate cut at the September Fed meeting, up from 85.1% a week earlier.

    US Initial Jobless Claims increased more than expected, data showed on Thursday, adding 243K new unemployment benefits seekers for the week ended July 12 compared to the expected 230K, and rising above the previous week’s revised 223K.

    On the Swiss front, the expectation that the Swiss National Bank (SNB) might cut interest rates further could weigh on the Swiss Franc (CHF). In June, the SNB reduced its key interest rate by 25 basis points for the second consecutive meeting. This decision was driven by subdued inflationary pressures and the resilience of the CHF.

    Kyle Chapman, FX markets analyst at Ballinger Group, stated, "I expect the SNB to follow up with a third cut next quarter, and there is potential for a fourth in December if there is still high conviction in the restrictive level of monetary policy."

    Swiss Franc FAQs

    The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.

    The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.

    The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.

    Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

    As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.

  • 18.07.2024 06:55
    USD/CHF gains ground near 0.8850, potential upside seems limited
    • USD/CHF holds positive ground near 0.8840 in Thursday’s early European session. 
    • Fed’s Waller said that central bank is nearing rate cuts if there are no major surprises in inflation, employment data.
    • The rate cuts expectation by the SNB might drag the US Dollar lower. 

    The USD/CHF pair trades on a positive note around 0.8840, snapping the two-day losing streak on Thursday during the early European trading hours. The modest rebound of the US Dollar (USD) provides some support to the pair. Looking ahead, traders will take more cues from the weekly Initial Jobless Claims and Philly Fed Manufacturing Index. 

    The recent dovish comments from Federal Reserve (Fed) officials boost bets of a US interest rate cut in September and might cap the upside for Greenback in the near term. Markets are fully pricing in a rate cut of at least 25 basis points (bps) by the Fed in September, according to CME's FedWatch Tool. Fed Governor Christopher Waller said that the US central bank is nearing an interest rate cut as long as there are no major surprises in inflation and employment data. Meanwhile, Richmond Fed President Thomas Barkin stated that easing in inflation has begun to broaden and he would like to see it continue.

    Earlier this week, Fed Chair Jerome Powell said recent inflation readings "add somewhat to confidence" that the pace of price increases is on track to meet the Fed's target in a sustainable manner, suggesting a shift to rate cuts is on the horizon. 

    On the Swiss front, the safe-haven flows amid the political uncertainty and geopolitical tensions might lift the Swiss Franc (CHF) and create a headwind for USD/CHF. However, the expectation that the Swiss National Bank (SNB) could cut further interest rates might weigh on the CHF. Kyle Chapman, FX markets analyst at Ballinger Group said, "I expect the SNB to follow up with a third cut next quarter, and there is potential for a fourth in December if there is still high conviction in the restrictive level of monetary policy. The dovish outlook puts the Franc in a vulnerable position over the coming quarters and could hinder any further recovery, particularly if the ECB takes its time in bringing rates down.” 

    Swiss Franc FAQs

    The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.

    The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.

    The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.

    Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

    As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.

     

  • 17.07.2024 05:23
    USD/CHF stays near 0.8950, focus shifts to Fedspeak
    • USD/CHF holds steady as market participants await speeches from Fed members.
    • Fed member Kugler indicated rates will be maintained longer if upcoming data does not confirm a slowdown in inflation.
    • Swiss 10-year bond yield declined to near 0.54%, nearing its lowest level since August 2022.

    USD/CHF holds ground near 0.8940 during the Asian session on Wednesday. The USD/CHF pair may receive support from a modest rebound in the US Dollar (USD), which is likely influenced by improved Treasury yields.

    Federal Reserve (Fed) Board of Governors member Dr. Adriana Kugler recently noted that while inflationary pressures have eased, the Fed requires more data to justify a rate cut. Dr. Kugler suggested that if upcoming data fails to show progress towards the 2% inflation target, maintaining current rates longer may be appropriate.

    Market focus turns to key US economic data and the Fed Beige Book on Wednesday, alongside speeches from Fed officials Thomas Barkin and Christopher Waller. On the Swiss front, attention will shift to Trade Balance data due on Thursday.

    On the Swiss front, the 10-year government bond yield further declined to near 0.54%, nearing its lowest level since August 2022, reflecting a similar trend seen in US bond yields. This movement followed remarks from Federal Reserve Chair Jerome Powell, which bolstered expectations for a rate cut by the Fed in September.

    Fed Chair Powell, on Monday, indicated that recent US inflation data "add somewhat to confidence" that inflation is progressing towards the Fed’s target sustainably, implying that a move towards interest rate cuts could be forthcoming.

    The Swiss National Bank (SNB) reduced its key interest rate by 25 basis points for the second consecutive meeting in June. This decision was driven by subdued inflationary pressures and the resilience of the Swiss Franc (CHF).

    Swiss Franc FAQs

    The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.

    The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.

    The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.

    Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

    As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.

  • 16.07.2024 07:04
    USD/CHF edges lower below 0.8950, US Retail Sales loom
    • USD/CHF trades weaker around 0.8945 in Tuesday’s European session. 
    • The rising bets on Fed rate cuts might cap the pair’s upside.
    • The political uncertainty in the US and Europe might underpin the Swiss France for the time being. 

    The USD/CHF pair trades on a softer note near 0.8945 on Tuesday during the early European session. The pair edges lower despite the modest rebound of Greenback. Later on Tuesday, the release of US Retail Sales will be in the spotlight. Also, the Federal Reserve’s (Fed) Adriana Kugler is scheduled to speak. 

    The downtick of the pair is supported by the rising expectation, that US Fed would cut the interest rate sooner than earlier this September. This, in turn, exerts some selling pressure on the Greenback. Traders are now pricing in a 100% odds that the Fed funds rate will decline by at least 25 basis points when the Federal Open Market Committee (FOMC) meets in September. 

    Fed Chair Jerome Powell said on Monday that the recent inflation data had added to confidence that price increases are returning to the target in a sustainable fashion. Powell further stated that the Fed doesn't expect to wait until inflation reaches 2% before acting, suggesting that rate cuts may not be far off. 

    On the Swiss front, the political uncertainty in the US and the second round of France’s parliamentary elections last weekend provide some support to the safe-haven currency like the CHF. Donald Trump was shot in the ear during his rally in Butler, Pennsylvania in an assassination attempt. One spectator was killed in the attack, two others were critically injured, and Trump was pictured with blood spilling from his ear, per the BBC. Furthermore, the concern about France’s budget remains, which helps to boost the INR. 

    Swiss economy FAQs

    Switzerland is the ninth-largest economy measured by nominal Gross Domestic Product (GDP) in the European continent. Measured by GDP per capita – a broad measure of average living standards –, the country ranks among the highest in the world, meaning that it is one the richest countries globally. Switzerland tends to be in the top spots in global rankings about living standards, development indexes, competitiveness or innovation.

    Switzerland is an open, free-market economy mainly based on the services sector. The Swiss economy has a strong export sector, and the neighboring European Union (EU) is its main trading partner. Switzerland is a leading exporter of watches and clocks, and hosts leading firms in the food, chemicals and pharmaceutical industries. The country is considered to be an international tax haven, with significantly low corporate and income tax rates compared with its European neighbors.

    As a high-income country, the growth rate of the Swiss economy has diminished over the last decades. Still, its political and economic stability, its high education levels, top-tier firms in several industries and its tax-haven status have made it a preferred destination for foreign investment. This has generally benefited the Swiss Franc (CHF), which has historically kept relatively strong against its main currency peers. Generally, a good performance of the Swiss economy – based on high growth, low unemployment and stable prices – tends to appreciate CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

    Switzerland isn’t a commodity exporter, so in general commodity prices aren’t a key driver of the Swiss Franc (CHF). However, there is a slight correlation with both Gold and Oil prices. With Gold, CHF’s status as a safe-haven and the fact that the currency used to be backed by the precious metal means that both assets tend to move in the same direction. With Oil, a paper released by the Swiss National Bank (SNB) suggests that the rise in Oil prices could negatively influence CHF valuation, as Switzerland is a net importer of fuel.


     

  • 15.07.2024 06:24
    USD/CHF strengthens above 0.8950 on the firmer US Dollar
    • USD/CHF rebounds near 0.8955 in Monday’s early European session. 
    • The hotter US PPI data on Friday did not change the Fed rate cut expectations in September.
    • The political uncertainty underpins the Swiss Franc against the Greenback. 

    The USD/CHF pair edges higher to 0.8955, snapping the two-day losing streak during the early European session on Monday. The firmer US Dollar (USD) provides some support to the pair. Later in the day, market players will watch the Swiss Producer and Import Prices for June, the NY Empire State Manufacturing Index for July, and the Fed’s Mary Daly speech. 

    The US producer prices increased slightly more than forecast in June amid a rise in the cost of services, which lifted the Greenback against the CHF. The US Producer Price Index (PPI) rose to 2.6% YoY in June, compared to the previous reading of 2.4%, above the market consensus of 2.3%. The core PPI climbed 3.0% YoY, better than the market expectation of 2.5%. Furthermore, the University of Michigan's Consumer Sentiment Index survey dropped to 66.0 in July from 68.2 in June, the lowest in seven months, falling short of the expected increase to 68.5. 

    However, the hotter-than-expected wholesale inflation data did not change expectations that the US Federal Reserve (Fed) could start cutting interest rates in September. Financial market pricing indicates over a 90% chance that the Fed will start its rate-cutting cycle in September and the bets were lifted by another soft US consumer inflation report released last week. 

    On the other hand, an attempted assassination of former US President Donald Trump on Saturday might boost safe-haven flows, which benefit the Swiss Franc (CHF) against the USD. According to the BBC, Donald Trump was shot in the ear during his rally in Butler, Pennsylvania, in an assassination attempt. One spectator was killed in the attack, two others were critically injured and Trump was pictured with blood spilling from his ear. 

    Swiss Franc FAQs

    The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.

    The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.

    The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.

    Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

    As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.

     

  • 12.07.2024 13:31
    USD/CHF Price Analysis: Correcting back in wave C of an ABC pattern
    • USD/CHF is correcting back after the rally in late June and early July. 
    • It is currently unfolding the wave C of an ABC corrective pattern. 

    USD/CHF is declining in what looks like the wave C of a three-wave ABC correction. The correction is from the rally that took place between the June 18 lows at 0.8827 up to the July 3 peak at 0.9051. 

    USD/CHF Daily Chart 


     

    The pair has not yet reached the end of wave C and could still fall further, however, it has reached the conservative target for C, which is the Fibonacci 0.618 ratio of the length of wave A.

    If USD/CHF falls further it could find support at the 200-day Simple Moving Average (SMA) at 0.8883. 

    Alternatively, a close above the July 10 high and the 50-day SMA at 0.9007 would probably signal a reversal higher, with the next target at 0.9051, the July 3 high. 

     

  • 12.07.2024 06:57
    USD/CHF weakens below 0.9000 ahead of US PPI data
    • USD/CHF trades in negative territory near 0.8960 for the second consecutive day on Friday.
    • Traders raised their bets on Fed rate cuts in September after the softer-than-expected June US CPI inflation report.
    • The speculation that the SNB will cut further interest rates might cap the pair’s downside.

    The USD/CHF pair trades on a weaker note around 0.8960 during the early European session on Friday. The downtick of the pair is backed by the softer US Dollar (USD) after US consumer prices unexpectedly fell in June. Investors will take more cues from the US June Producer Price Index (PPI) and the preliminary July Michigan Consumer Sentiment gauge for fresh impetus, which is due later on Friday.

    The US CPI dropped 0.1% MoM in June after being unchanged in May, according to the Bureau of Labor Statistics on Thursday. This figure registered the lowest monthly reading since May 2020. Meanwhile, the annual CPI rose 3% YoY in the same report period, the lowest reading in a year. The softer inflation reading spurred the expectation that the Federal Reserve (Fed) would cut the interest rate in the coming months.

    Chicago Fed President Austan Goolsbee said early Friday that the latest inflation data was “excellent,” adding that the reports provided proof that the Fed is on track to meet its 2% target. Meanwhile, St Louis Fed President Alberto Musalem marked  "encouraging further progress" toward the Fed inflation target. San Francisco Fed President Mary Daly noted that the cooling of price pressures bolsters the case for cutting rates, even if the timing remains a matter for debate. The Greenback edges lower amid the growing speculation of a Fed rate cut this year, with traders seeing a nearly 85% chance of easing in September, according to CME Group’s FedWatch Tool.

    On the Swiss front, geopolitical tensions, political uncertainty in the US and Europe, and concerns about the global economic slowdown might boost safe-haven assets like the Swiss Franc (CHF). However, the speculation that the Swiss National Bank (SNB) will cut further interest rates might exert some selling pressure on the CHF.

    Swiss Franc FAQs

    The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.

    The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.

    The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.

    Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

    As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.

     

  • 11.07.2024 05:39
    USD/CHF edges lower below 0.9000, US CPI data looms
    • USD/CHF loses momentum around 0.8995 in Thursday’s early European session. 
    • Fed’s Powell said the case for interest rate cuts is becoming stronger as inflation data showed some modest further progress.
    • Political uncertainty in Europe and globally might boost the safe-haven flows, benefiting the CHF. 

    The USD/CHF pair trades with mild losses near 0.8995, snapping the three-day winning streak during the early European session on Thursday. The rising Federal Reserve (Fed) rate cut bets drag the pair lower. Traders await the US June Consumer Price Index (CPI) inflation data on Thursday, which is expected to show an increase of 3.1% YoY in June. 

    The Fed Chair Jerome Powell's comments continue to undermine the Greenback as traders see the US central bank begin its rate-cutting cycle in September. Powell said in testimony Tuesday to Congress that the case for interest rate cuts is becoming stronger as the most recent inflation data showed some modest further progress. He further stated that "more good data" could open the door to interest rate cuts.  

    However, the softer CPI inflation data for June could fuel the expectation of September rate cuts, which might exert some selling pressure on the Greenback. Financial markets are now pricing in less than a 10% chance of a Fed July rate cut, while the expectation for a September cut stood at 73%, according to the CME FedWatch Tool.

    On the Swiss front, the speculation that the Swiss National Bank will cut further interest rates might weigh on the CHF.  Kyle Chapman, FX markets analyst at Ballinger Group said "I expect the SNB to follow up with a third cut next quarter, and there is potential for a fourth in December if there is still high conviction in the restrictive level of monetary policy. The dovish outlook puts the franc in a vulnerable position over the coming quarters and could hinder any further recovery, particularly if the ECB takes its time in bringing rates down.” Elsewhere, political uncertainty in Europe and elsewhere might boost the Swiss Franc (CHF), which is a safe-haven currency. 

     

    Swiss Franc FAQs

    The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.

    The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.

    The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.

    Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

    As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.

     

  • 10.07.2024 12:11
    USD/CHF Price Analysis: Consolidates below 0.9000 as focus shifts to US Inflation
    • USD/CHF trades back and forth below 0.9000 with US inflation in focus.
    • US core inflation is estimated to have risen steadily in June.
    • Easing Swiss inflation has boosted expectations of more SNB rate cuts.

    The USD/CHF pair trades sideways slightly below the psychological resistance of 0.9000 in Wednesday’s European session. The Swiss Franc asset struggles for a direction as investors await the United States (US) Consumer Price Index (CPI) data for June, which will be published on Thursday.

    The US CPI report is expected to show that the core CPI, which excludes volatile food and energy prices, rose steadily by 0.2% and 3.4% on monthly and an annual basis. Monthly headline inflation is expected to have grown by 0.1% after remaining unchanged previously. While the annual figure is estimated to have decelerated to 3.1% from May’s reading of 3.3%.

    A scenario in which price pressures remain sticky or hot would ease expectations for rate cuts in September. On the contrary, soft numbers will boost them.

    Meanwhile, the near-term appeal of the Swiss Franc remains uncertain as cooling inflationary pressures have boosted expectations of more rate cuts by the Swiss National Bank (SNB). Swiss annual CPI rose at a slower pace of 1.3% in June from estimates and the prior release of 1.4%.

    USD/CHF trades in a Falling Channel chart pattern on a daily timeframe in which each pullback is considered as selling opportunity by market participants. The Swiss Franc asset finds cushion near 200-day Exponential Moving Average (EMA) around 0.8950, suggesting that a bullish long-trend is intact.

    The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting indecisiveness among investors.

    Going forward, a decisive upside above June 3 high at 0.9036will drive the asset towards May 28 low at 0.9086, followed by May 30 high at 0.9140.

    On the flip side, the asset would expose to downside if it breaks below June 4 low of 0.8900. This would drag the asset towards March 21 low at 0.8840 and the round-level support of 0.8800.

    USD/CHF daily chart

    Swiss Franc FAQs

    The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.

    The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.

    The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.

    Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

    As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.

     

  • 10.07.2024 07:02
    USD/CHF weakens below 0.9000 ahead of Powell and Fedspeak
    • USD/CHF loses ground, snapping the three-day winning streak around 0.8970 on Wednesday. 
    • Fed’s Powell noted that the central bank is moving closer to feeling comfortable about interest rate cuts.
    • Political uncertainties and geopolitical risks might boost the safe-haven asset like the CHF. 


    The USD/CHF pair trims gains near 0.8970 during the early European session on Wednesday. The downward momentum of the pair is supported by the softer Greenback after Jerome Powell's Semiannual Monetary Policy Report on Wednesday.

    The US Federal Reserve Chair Jerome Powell indicated the central bank is moving closer to feeling comfortable about interest rate cuts. He further stated that evidence of cooler inflation and that more "good data" could open the door to interest rate cuts.

    The financial market is now pricing in 74% odds of a Fed rate cut in September, up from 71% last Friday, according to data from the CME FedWatch Tool. However, the Federal Open Market Committee (FOMC) members at their June meeting indicated just one cut this year. The expectation of a Fed rate cut might exert some selling pressure on the US Dollar (USD) in the near term.

    Traders will focus on the weaker Greenback ahead of the US Consumer Price Index (CPI) inflation data on Thursday will be the highlights this week. The US CPI is estimated to show a rise of 3.1% YoY in June, compared to a 3.3% rise in May.  Core inflation is projected to remain steady at 3.4% YoY in June. 

    On the Swiss front, the signs of cooler inflationary pressures in Switzerland might fuel the Swiss National Bank (SNB) to continue cutting interest rates further, which is likely to exert some selling pressure on the Swiss Franc (CHF). Nonetheless, the downside of CHF might be limited amid political uncertainties in France and geopolitical tensions in the Middle East.

    Swiss economy FAQs

    Switzerland is the ninth-largest economy measured by nominal Gross Domestic Product (GDP) in the European continent. Measured by GDP per capita – a broad measure of average living standards –, the country ranks among the highest in the world, meaning that it is one the richest countries globally. Switzerland tends to be in the top spots in global rankings about living standards, development indexes, competitiveness or innovation.

    Switzerland is an open, free-market economy mainly based on the services sector. The Swiss economy has a strong export sector, and the neighboring European Union (EU) is its main trading partner. Switzerland is a leading exporter of watches and clocks, and hosts leading firms in the food, chemicals and pharmaceutical industries. The country is considered to be an international tax haven, with significantly low corporate and income tax rates compared with its European neighbors.

    As a high-income country, the growth rate of the Swiss economy has diminished over the last decades. Still, its political and economic stability, its high education levels, top-tier firms in several industries and its tax-haven status have made it a preferred destination for foreign investment. This has generally benefited the Swiss Franc (CHF), which has historically kept relatively strong against its main currency peers. Generally, a good performance of the Swiss economy – based on high growth, low unemployment and stable prices – tends to appreciate CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

    Switzerland isn’t a commodity exporter, so in general commodity prices aren’t a key driver of the Swiss Franc (CHF). However, there is a slight correlation with both Gold and Oil prices. With Gold, CHF’s status as a safe-haven and the fact that the currency used to be backed by the precious metal means that both assets tend to move in the same direction. With Oil, a paper released by the Swiss National Bank (SNB) suggests that the rise in Oil prices could negatively influence CHF valuation, as Switzerland is a net importer of fuel.

     

  • 09.07.2024 19:30
    USD/CHF mildly rises, eyes on US inflation data this week
    • Ahead of the much-anticipated US inflation data, the USD/CHF saw a mild rise.
    • Fed Chair Jerome Powell's comments to the US Congress dictated market sentiments on Tuesday.
    • As expected, the Fed continues to ask for patience and does not fully embrace cuts.

    On Tuesday, the USD/CHF found some footing and mildly rose to 0.8980. The pair gained momentum as the Federal Reserve (Fed) Chair Jerome Powell addressed the US Congress and showed himself cautious regarding the bank’s next steps. Beyond this, market participants are eyeing Thursday when the US releases June's inflation figures.

    The market's focus on Tuesday was on Jerome Powell's Semiannual Monetary Policy Report. Powell stated that sounder economic data would fortify the Federal Reserve's conviction in tackling inflation. He also noted that more than evidence of inflation moving towards the 2% target before implementing rate cuts is crucial. Finally, he further confirmed that the Fed's decision-making is an ongoing process, considering policies at every meeting.

    The highly anticipated June Consumer Price Index (CPI) data from the US will have a pivotal role. June's headline CPI is expected to slow to 3.1%, descending from May's reading of 3.3%, thereby marking the third consecutive monthly slowdown.

    USD/CHF technical analysis

    The short-term technical outlook for the pair has somewhat turned negative with the Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) indicators having lost significant ground but now lying in neutral terrain.

    The focal point now lies in whether the buyers will defend the 20-day Simple Moving Average (SMA) at 0.8950. The pair found resistance at the 100-day SMA at 0.8990, effectively nullifying today's gains. Consequently, the pair may continue trading within the channel demarcated by the 100-day and 20-day SMA.

    USD/CHF daily chart

  • 09.07.2024 09:04
    USD/CHF Price Analysis: 200-day EMA continues to be key support
    • USD/CHF recovers to near 0.9000 ahead of Fed Powell’s testimony.
    • Investors expect that the Fed will start reducing interest rates from September.
    • Market speculation for more rate cuts by the SNB has improved.

    The USD/CHF pair rebounds to near the psychological resistance of 0.9000 in Tuesday’s European session. The Swiss Franc asset moves higher as the US Dollar (USD) gains ground ahead of the Federal Reserve (Fed) chair Jerome Powell’s semi-annual Congressional testimony, which is scheduled at 14:00 GMT.

    The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, steadies after declining to a fresh three-week low near 104.85.

    Fed Powell would provide cues about when the central bank will start reducing interest rates. Financial markets currently expect the Fed to begin lowering its key rates from the September meeting. This week, the major trigger for the US Dollar will be the US inflation data for June which will be published on Thursday.

    On the Swiss Franc front, investors expect that the Swiss National Bank (SNB) could continue easing its monetary policy as inflation in the Swiss economy has decelerated further. Annual Swiss inflation grew at a slower pace of 1.3% in June from the estimates and the prior release of 1.4%.

    USD/CHF trades in a Falling Channel chart pattern on a daily timeframe in which each pullback is considered as selling opportunity by market participants. The Swiss Franc asset finds cushion near 200-day Exponential Moving Average (EMA) around 0.8950, suggesting that a bullish long-trend is intact.

    The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting indecisiveness among investors.

    Going forward, a decisive upside above June 3 high at 0.9036will drive the asset towards May 28 low at 0.9086, followed by May 30 high at 0.9140.

    On the flip side, the asset would expose to downside if it breaks below June 4 low of 0.8900. This would drag the asset towards March 21 low at 0.8840 and the round-level support of 0.8800.

    USD/CHF daily chart

    Swiss Franc FAQs

    The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.

    The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.

    The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.

    Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

    As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.

     

  • 09.07.2024 05:26
    USD/CHF holds positive ground above 0.8950, Fed Powell’s testimony eyed
    • USD/CHF trades on a stronger note near 0.8980 in Tuesday’s early European session. 
    • The US Dollar edges lower due to a potential September rate cut from the Fed.  
    • Political uncertainties both within Europe and globally, might support the CHF. 

    The USD/CHF pair trades in positive territory for the second consecutive day around 0.8980 on Tuesday during the early European session. Meanwhile, the USD Index (DXY) consolidates near the 105.00 level ahead of Federal Reserve (Fed) Chair Jerome Powell's semi-annual monetary policy testimony on Tuesday. 

    The rising expectation that the US Fed will start cutting the interest rate earlier than previously expected has dragged the Greenback lower. Fed Powell’s testimony might offer some hints about whether the possibility of a September rate cut has improved with the latest data. If Powell delivers hawkish comments, this might provide some support for the US Dollar (USD). Financial markets are now pricing in a nearly 76% chance of a Fed rate cut in September, up from 71% last Friday, according to the CME FedWatch tool. 

    Market players will shift their attention to the US Consumer Price Index, which is due on Thursday. The US CPI is estimated to show an increase of 3.1% YoY in June, compared to a 3.3% rise in May. Core inflation is projected to remain steady at 3.4% YoY in June. 

    On the Swiss front, political uncertainties in both within Europe and globally might boost a safe-haven currency like the Swiss Franc (CHF). However, the cooler inflationary pressures in Switzerland could prompt the Swiss National Bank (SNB) to continue cutting interest rates further. This, in turn, is likely to weigh on the CHF and create a tailwind for USD/CHF in the near term. 

    Swiss Franc FAQs

    The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.

    The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.

    The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.

    Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

    As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.

     

  • 08.07.2024 20:12
    USD/CHF opens the week with a slight rise, eyes on US CPI
    • USD/CHF rose slightly in the quiet market environment ahead of this week's US CPI data.
    • Last week's underwhelming US data weighed on the USD.
    • Markets are bracing for the US inflation data due later in the week for directional cues.

    On Monday, the USD/CHF traded largely neutral around 0.8970 with some gains. That being said, the pair continues soft, following last week's US data which fueled dovish bets on the Federal Reserve (Fed) which made markets dump the USD. There won't be any highlights on Monday and markets brace for inflation data from the US later in the week.

    The US markets are now keenly watching for the release of June's Consumer Price Index (CPI). The data will play a crucial role in determining whether the inflation resurgence is tapering off or if the softer readings in April and May were transitory. The headline CPI for June is predicted to decelerate to 3.1% YoY, down from May's 3.3%, marking a third successive month of slowing growth. In addition, Fed Chair Powell delivers his Semiannual Monetary Policy Report to Congress this week on Tuesday which might also shake the USD dynamics.

    On the Swiss side, no major highlights are expected this week, hinting that the pair's movement will be mostly driven by the USD's dynamics. Financial markets see over 50% odds of a third interest-rate cut by the Swiss National Bank (SNB) in September. Likewise, the odds of a cut by the Fed in September have soared to around 80% according to the CME FedWatch tool.

    USD/CHF technical analysis

    The technical outlook remains somewhat negative in the short term. The pair broke the six-day winning streak and has now recorded losses for three consecutive sessions ending last Friday. Moreover, The Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) indicators continue to lose momentum.

    The pair's movement now centers around whether the buyers will defend the 20-day Simple Moving Average (SMA) at 0.8950. The 100-day SMA, which sits at 0.8990, is now the immediate resistance level.

    USD/CHF daily chart

  • 08.07.2024 05:44
    USD/CHF extends losing streak as Fed rate cut prospects improve
    • USD/CHF falls below 0.9000 amid a weak US Dollar.
    • The Fed is expected to start lowering interest rates in September.
    • Easing Swiss inflation has boosted prospects of more rate cuts by the SNB.

    The USD/CHF pair extends its losing streak for the fourth trading day on Monday. The Swiss Franc asset stays below the psychological figure of 0.9000 as the US Dollar’s (USD) outlook appears to be vulnerable due to growing speculation that the Federal Reserve (Fed) will pivot to policy normalization from the September meeting.

    The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, finds a temporary support near three-week low around 104.85. 10-year US Treasury yields edge higher to 4.3% but trades close to weekly low.

    Improves expectations for the Fed reducing interest rates earlier than previously anticipated is unfavorable for the US Dollar and bond yields. In the latest dot plot, Fed officials signalled only one rate cut this year and policymakers have forecasted that in the last quarter.

    The possibility of the Fed lowering interest rates from September has strengthened due to moderating United States (US) labor market strength as indicated by the Nonfarm Payrolls (NFP) report for June. The report showed that the Unemployment Rate rose to 4.1% and annual Average Hourly Earnings, a measure of wage inflation, decelerated expectedly to 3.9%. While payrolls data beat estimates but remained below May’s reading.

    This week, investors will keenly focus on the US inflation data for June, which will be published on Thursday.

    On the Swiss Franc front, easing inflationary pressures could force the Swiss National bank (SNB) to continue reducing interest rates further. Annual Swiss Consumer Price Index (CPI) decelerated to 1.3% in June, while economists expected price pressures to have grown steadily by 1.4%.

    Swiss Franc FAQs

    The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.

    The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.

    The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.

    Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

    As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.

     

  • 05.07.2024 20:00
    USD/CHF losses further ground following rise in US Unemployment
    • USD/CHF continues soft following an unexpected increase in US Unemployment.
    • On the positive side for the US, NFPs for June surpassed market expectations.
    • With falling inflation in both countries, both the Federal Reserve and the SNB could embrace cuts.

    In Friday's session, the USD/CHF pair softly sailed, with markets dumping further the USD following the release of mixed labor market data in the US.

    The center of attention on Friday was the unexpected rise in the US Unemployment Rate to 4.1% from 4%, and an increase in Nonfarm Payrolls (NFP) in June by 206K, surpassing the market expectation of 190K. The rise in NFP follows a revised gain of 218K in May, down from the initially reported 272 K. As for Wage Inflation, indicated by the change in Average Hourly Earnings, decreased to 3.9% from 4.1% YoY, aligning with market forecasts.

    This confirmed an overall uncertainty around the health of the labor market and substantially increased market odds for two cuts by the Federal Reserve by year-end, with the September bets reaching 90% according to the CME FedWatch tool.

    On the Swiss front, market participants adjusted their expectations for a third interest-rate cut by the Swiss National Bank (SNB) in September after the inflation data announcement on Thursday which slightly declined, pushing the odds over 50%.

    USD/CHF technical analysis

    The technical outlook now turns somewhat negative in the short term. The currency pair ended a promising six-day streak, with the Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI), losing momentum.

    The pair is expected to end the week with mild losses, and closing a dip below the Simple Moving Average (SMA) on the daily chart. Main supports now lie at the 20-day SMA at 0.8950, while the next immediate resistance has shifted to the 100-day SMA at 0.8990 (former support).

    USD/CHF daily chart

  • 05.07.2024 13:19
    USD/CHF slides as US data paints a picture of a cooling economy
    • USD/CHF is falling on US Dollar weakness as data out of the US paints a picture of a cooling US economy. 
    • Recent services’ sector and labor-market data hint at a softness which could lead the Federal Reserve to enact Dollar-negative policies. 
    • The Swiss Franc, however, remains fundamentally weak as the Swiss National Bank continues lowering interest rates in Switzerland. 

    USD/CHF reached a four-week high of 0.9050 on July 3 before proceeding to roll over and fall. It is currently trading in the 0.8980s. The decline has been put down to US Dollar weakness more than Swiss Franc (CHF) strength. A run of poor data from the US has made it more likely the Federal Reserve (Fed) will start to ease monetary policy – a move that would weaken the US Dollar. 

    USD/CHF 4-hour Chart 

    The poor data that has started weighing on the US Dollar includes the ISM Services PMI data for June which came out at 48.8 from 53.8 previously. This was significant because the services’ sector has been singled out as a key contributing factor to the stubbornly high inflation in the US economy, which in turn has prevented the US Federal Reserve (Fed) from lowering interest rates. 

    However, the weak ISM Services PMI data in June indicates the sector might be beginning to cool down which could further bring down inflation more generally and allow the Fed to cut interest rates. Although lower interest rates are positive for businesses because they reduce borrowing costs, they are negative for a currency because they make it less attractive to foreign investors as a place to park their capital. Thus the data weighed on the US Dollar and USD/CHF. 

    Signs of a softening labor market are also weighing on the US Dollar. The Nonfarm Payrolls (NFP) report for June has shown a rise in the Unemployment Rate to 4.1% from 4.0% when no-change was expected. This is its highest since November 2021 just after the pandemic. Additionally, Initial Jobless Claims rose more than expected in late June, and Continuing Claims climbed to 1.858 million – also the highest since November 2021. The overall softer employment data, adds to the picture of a cooling economy.   

    Swiss Franc depreciates on lower interest rates

    For any currency pair the difference between the interest rates of the two currencies, or the “interest-rate differential” is key. As such, it is not just the projection for interest rates in the US but also for Switzerland, that is a determinant of the exchange rate. 

    USD/CHF rose 2.5% in just two weeks at the end of June after the Swiss National Bank (SNB) decided to cut its main interest rate by 0.25% to 1.25%, at its June 20 meeting. This was the second time this year that the SNB had decided to cut its policy rate.

    The chart below compares the SNB and Fed’s policy rates over the last three years. As can be seen, whilst both began raising interest rates to combat high inflation after the Covid pandemic, inflation fell back down to normal levels more quickly in Switzerland so the SNB was able to reduce interest rates earlier there. The Fed, in contrast, has yet to begin cutting interest rates in the US due to stubbornly high inflation. This has benefited the US Dollar. 


     

    The recent run of weak US data, however, makes it more likely the Fed will also begin cutting interest rates at its meeting in September. 

    The probability of the Fed cutting its principal policy rate, the Fed Funds rate, by 0.25% to an upper limit of 5.25% by September, has increased from the mid-60s at the end of June to around 75% on Friday July 5, according to the CME FedWatch tool, which uses the price of the 30-day Fed Funds futures in its calculations

     

  • 05.07.2024 05:14
    USD/CHF languishes near multi-day low, below 0.9000 as traders look to US NFP
    • USD/CHF drifts lower for the third straight day amid the prevalent USD selling bias.
    • Rising bets for a September Fed rate cut move continue to weigh on the Greenback.
    • The downside is likely to remain limited as traders await the release of the US NFP.

    The USD/CHF pair remains under some selling pressure for the third successive day and slides to a multi-day low, below the 0.9000 psychological mark during the Asian session on Friday. Bearish traders now await a sustained breakdown through the 100-day Simple Moving Average (SMA) before positioning for an extension of the recent pullback from a one-month peak touched earlier this week amid sustained US Dollar (USD) selling.

    The incoming softer US macro data pointed to signs of weakness in the labor market and a loss of momentum in the economy at the end of the second quarter. This reaffirms market bets that the Federal Reserve (Fed) will start cutting rates in September and drags the USD Index (DXY), which tracks the Greenback against a basket of currencies, to over a three-week low, which, in turn, is seen as a key factor exerting downward pressure on the USD/CHF pair. 

    Apart from this, the decline could further be attributed to some repositioning trade ahead of the closely-watched US monthly employment details, due for release later during the North American session. The popularly known Nonfarm Payrolls (NFP) report will play a key role in influencing market expectations about future policy decisions, which, in turn, should drive the USD demand and determine the near-term trajectory for the USD/CHF pair. 

    Meanwhile, the Swiss Consumer Price Index (CPI), released on Thursday, declined to 1.3% YoY in June as compared to the 1.4% YoY expected. Furthermore, the core gauge ticked lower to the 1.1% yearly rate against the 1.2% anticipated, which could allow the Swiss National Bank (SNB) to ease further. Moreover, the SNB had shown readiness to intervene in the FX market, which should cap the Swiss Franc (CHF) and lend support to the USD/CHF pair.

    Fed FAQs

    Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

    The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

    In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

    Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

     

  • 04.07.2024 19:56
    USD/CHF holds its ground after soft Swiss CPI
    • The USD/CHF extended its decline despite soft CPI figures from Switzerland.
    • US ADP employment report and ISM Services PMI data for June from the US came in weaker than expected which pressures down the pair.
    • Due to softening inflation, the SNB might embrace further cuts.

    In Thursday's session, the USD/CHF pair slightly declined, with markets showing a less enthusiastic attitude towards the USD after weak data outcomes. The key movers are the disappointing US ISM Services PMI for June, which indicated a contraction in the US service sector reported on Wednesday. In the European session, the Swiss inflation figures came in soft.

    The center of attention on Wednesday was the weak ADP Employment report for June, with private sector jobs increasing by 150K compared to the revised forecast of 160K. Additionally, the ISM Services PMI considerably underperformed, dropping to 48.8 from 53.8 in May and missing the market expectation of 52.5. Subsequently, markets grew more confident of a September cut from the Federal Reserve (Fed) which weighed on the USD.

    Anticipation grows for the US labor market figures, notably the Nonfarm Payrolls for June and Unemployment and wage inflation figures due on Friday. These figures have drawn enhanced scrutiny due to growing concerns among Fed officials about the health of the labor market and may shift the expectations of the timing of the easing cycle.

    On the Swiss front, the June Consumer Price Index (CPI) announced on Thursday showed a decline to 1.3% YoY vs the 1.4% YoY expected. The Core slightly declined to 1.1% the 1.2% expected. The lower inflation might give scope to the SNB to ease further. Hence, market odds for a September interest-rate cut by the SNB exceeded 50%.

    USD/CHF technical analysis

    The technical outlook turned somewhat negative in the short term. The currency pair cut a promising six-day streak, with indicators including the Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) losing momentum. Main supports lie at the 100-day Simple Moving Average (SMA) at 0.8985, followed by the 20-day SMA at 0.8950. The immediate target for the buyers remains at 0.9040.

    USD/CHF daily chart

     

  • 04.07.2024 07:53
    USD/CHF appreciates toward 0.9050 due to slowdown in Swiss inflation
    • USD/CHF regains ground due to lower-than-expected Swiss inflation.
    • The Swiss CPI came in at 1.3%, down from May's four-month high and below the market expectation of 1.4%.
    • Fed’s Austan Goolsbee stated that bringing inflation back to 2% will require time.

    The USD/CHF recovers recent losses, trading around 0.9030 during the early European hours on Thursday. The Swiss Franc (CHF) struggles due to a slowdown in Swiss inflation. The Consumer Price Index (CPI) for June decreased to 1.3% year-over-year, from May's four-month high and below market expectations of 1.4%.

    On a monthly basis, the CPI remained unchanged in June after a 0.3% rise in May. Additionally, the core CPI, which excludes volatile items such as unprocessed food and energy, decreased to 1.1% year-on-year in June from 1.2% in the previous month.

    The US Dollar (USD) struggles as softer data from the United States (US) escalated speculations of the Federal Reserve (Fed) reducing interest rates in 2024.  US ISM Services PMI fell sharply to 48.8 in June, marking the steepest decline since April 2020. This figure was well below market expectations of 52.5, following a reading of 53.8 in May. The ADP Employment report showed that US private businesses added 150,000 workers to their payrolls in June, the lowest increase in five months. This figure fell short of the expected 160,000 and was below the downwardly revised 157,000 in May.

    Federal Reserve Bank of Chicago President Austan Goolsbee stated on BBC Radio on Wednesday that bringing inflation back to 2% will take time and that more economic data are needed. However, on Tuesday, Fed Chair Jerome Powell said that the central bank is getting back on the disinflationary path, per Reuters.

    The US Dollar Index (DXY), which measures the USD against six major currencies, is under pressure due to lower US Treasury yields. The DXY is trading around 105.30 at the time of writing. As of Wednesday’s close, the yields on 2-year and 10-year US Treasury bonds were 4.70% and 4.35%, respectively. US markets will be closed on Thursday in observance of the Independence Day holiday.

    Inflation FAQs

    Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

    The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

    Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

    Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

     

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