USD/CHF stays sideways between 0.9190 and 0.9250s

• USD/CHF is stuck in a daily range as covid risks abate.
• Markets will, however, keep a watchful eye on the value of the CHF and the SNB.

USD/CJHF is trading at 0.9133 and flat in the day. The pair is in a daily consolidation between the 0.9190 and 0.9250s as risk appetite bounced back. Risk appetite remained strong on Wednesday as Omicron concerns continued to fade, lifting global equities.

This is leaving the USD and CHF on the sidelines as investors move into riskier asset classes and away from safe-havens. Early evidence suggests fewer people are needing hospital treatment than with other variants - with estimates ranging from a 30% to a 70% reduction, the BBC reported.  The S&P 500 gained 1% to 4,696.56, the Nasdaq Composite rallied 1.2% to 15,521.89 and the Dow Jones Industrial Average gained 0.7% to 35,753.89. Pfizer rose after the FDA approved the covid-19 tablet for emergency use in the US.

However, as uncertainties prevail, there could be a reversal in the mood and this would be expected to support the swiss franc due to Its role as the quintessential risk hedge to European risk. With that being said, the Swiss National Bank looks set to keep intervening in the FX market to curb CHF appreciation.

Eyes on the SNB

 The Swiss National Bank stuck to its ultra-loose monetary policy this month, diverging from the tightening path being taken by a growing number of central banks such as the Federal Reserve and despite higher inflation and a surge in the value of the safe-haven Swiss franc. Although inflation is rising in the nation, the SNB regards it as being comparatively modest to the rate of 1.5% in November. SNB Chairman Thomas Jordan said he thought inflation had peaked at this level and would decline during 2022.

The Swiss franc has appreciated 3% more in nominal since the SNB's last meeting and trade-weighted terms and by some 6% since the beginning of the pandemic, Jordan told a press conference.

"The nominal appreciation ..does not entail an appreciation to the same extent in real terms," Jordan explained.

"The real trade-weighted Swiss franc exchange rate – which takes into account the inflation rate differential with other countries – has hardly changed since the beginning of the pandemic," he said. "There is thus no change in our assessment that the Swiss franc remains highly valued."