- The USD / CHF bulls remain on the sidelines in the middle of the lack of significant purchase interest in the USD.
- The sustained demand for lodges underlying CHF and also contributes to the cap of the major.
- The merchants seem reluctant to place aggressive directional bets before the key meeting of the FOMC.
The USD / CHF pair is struggling to capitalize on a modest increase in Asian session and is currently placed near the lower limit of its daily range in the middle of the price action of the US dollar (USD). The cash prices, however, manage to maintain above the 0.8200 bar while merchants choose to wait for the outcome of a two-day FOMC monetary policy from later during the day.
The Federal Reserve (Fed) is expected to announce its decision on Wednesday and should largely leave stable interest rates. In addition, merchants have reduced their bets according to which the Fed will reduce the prices in June after optimistic data from the American jobs on Friday and the PMI of the American ISM services better than expected on Monday. Consequently, the emphasis will be placed on the policy statement which accompanies it and the remarks of the president of the Fed, Jerome Powell, during the press conference after the meeting. Investors will seek indices on the Fed rate path, which, in turn, will lead to the USD and provide significant momentum at the USD / CHF pair.
In the meantime, increased economic uncertainty led by the erratic trade policies of US President Donald Trump fails to help the USD attract significant buyers. In addition, the persistent geopolitical risks resulting from the prolonged Russian-Ukraine war and the climbing of conflicts in the Middle East overshadowed the recent optimism led by signs of softening American-Chinese trade tensions. This, in turn, is seen by providing certain support for the Swiss Franc (CHF) to Haven sure and helps cap the upward side for the USD / CHF pair. However, lowering transactions seem reluctant before the key risk of the central bank event.
Consequently, it will be prudent to wait for a rupture and a sustained acceptance below the round figure of 0.8200 before confirming that the recent recovery of the region of 0.8040, or the lowest level since September 2011 hit last month, is short of steam. On the other hand, the bulls could wait a step beyond the congestion zone of 0.8300-0.8330 before positioning for any other movement of short-term appreciation.
FAQ Swiss Franc
The Swiss franc (CHF) is the official currency of Switzerland. It is one of the first ten most negotiated currencies in the world, reaching volumes that are well exceeding the size of the Swiss economy. Its value is determined by the general feeling of the market, economic health or the measures of the country taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss franc was set at the Euro (EUR). The PEG was suddenly withdrawn, resulting in an increase of more than 20% of the value of the franc, causing a turmoil on the markets. Even if the ankle is no longer in force, the Fortunes du CHF tend to be strongly correlated with those Euro due to the high dependence of the Swiss economy with regard to the neighboring euro zone.
The Frankish Swiss (CHF) is considered to be a swell asset of of course, or a currency that investors tend to buy during the market stress period. This is due to the perceived status of Switzerland in the world: a stable economy, a solid export sector, large reserves of central banking or a long -standing political position for neutrality in world conflicts make the country's currency a good choice for investors fleeing risks. Turbulent times are likely to strengthen the value of CHF compared to other currencies which are considered more risky to invest.
The Swiss National Bank (SNB) meets four times a year – once a quarter, less than the other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is greater than the objective or planned to be higher than the objective in the foreseeable future, the bank will try to energize prices by increasing its policy rate. Higher interest rates are generally positive for the Swiss franc (CHF) because they lead to higher yields, which makes the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data versions in Switzerland are essential to assess the state of the economy and can have an impact on the evaluation of the Swiss franc (CHF). The Swiss economy is largely stable, but any sudden change in economic growth, inflation, the current account or the currency reserves of the Central Bank has the potential to trigger movements in CHF. Generally, high economic growth, low unemployment and great confidence are good for CHFs. Conversely, if the economic data indicate a weakening of the momentum, the CHF is likely to depreciate.
As a small and open economy, Switzerland strongly depends on the health of the neighboring economies of the euro zone. The broader European Union is the main economic partner of Switzerland and a key political ally, so that the stability of macroeconomic and monetary policy in the euro zone is essential for Switzerland and, therefore, for the Swiss franc (CHF). With such dependence, some models suggest that the correlation between the fortune of the euro (EUR) and the CHF is greater than 90%, or close to perfection.
