- The USD/CHF meets new sales and is pressed for a combination of factors.
- The fears of recession in the US and the betting of the Fed fees weigh on the USD and the currency pair.
- The global escape towards security benefits the CHF and contributes to the tone of sales.
The USD/ChF pair attracts new sellers during Wednesday’s Asian session and erodes an important part of the modest recovery profits from the previous day. Cash prices fall again closer to half of 0.8100 in the last hour and remain well within the reach of a minimum of ten years reached last Friday in the middle of a widely weaker US dollar (USD).
In fact, the USD (DXY) index, which tracks the dollar against a foreign exchange basket, languishes near its lowest level since April 2022 amid the weakened confidence in the US economy. In addition, the bets that the Federal Reserve (Fed) will soon resume its cycle of rate cuts and will reduce the costs of loans in 100 basic points in 2025 continue to affect the attraction for the dollar. This, in turn, is considered a key factor that exerts downward pressure on the USD/CHF torque.
Meanwhile, the initial market reaction to the decision of US President Donald Trump last week of pausar reciprocal tariffs for 90 days turned out to be ephemeral amid concerns about a recession in the US and the growing commercial war between the US and China. In addition, the rapid change of Trump posture over commercial tariffs feeds uncertainty and weighs on the feeling of investors. This benefits the Swiss Franco (CHF) of safe refuge and contributes to the sales tone surrounding the USD/CHF torque.
The aforementioned fundamental background suggests that the path of lower resistance for cash prices remains down and supports the perspectives of an extension of a three -month bearish trend, from the maximum of the year achieved in January. However, operators could choose to wait for the appearance of the president of the FED, Jerome Powell, later during the US session to obtain clues on the path of feat cuts. Meanwhile, US retail sales data could influence 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.
