- The USD/CHF collapses to a minimum of three months about 0.8760 in the middle of a firm demand for safe refuge for the Swiss Franco.
- The American economy is expected to face short -term economic clashes.
- Investors see the SNB further flexible monetary policy because price pressures remain low.
The USD/CHF pair marks a new minimum of three months around 0.8760 at the beginning of the week. The torque weakens as the demand for safe refuge of the Swiss Franco (CHF) increases amid increasing concerns about the economic perspectives of the United States (USA).
Investors see that the US economy will face short -term economic turbulence, since the “first” America “Agenda of President Donald Trump is expected to result in a deceleration of the general demand. On Friday, Trump said in an interview with Fox News that there is a period of “transition”, because what we are doing is very “big.”
The fears of a growth slowdown in the US have caused expectations that the Federal Reserve (FED) could cut interest rates in the June policy meeting. According to the CME Fedwatch tool, the probability that the Fed cuts interest rates in June has increased to 82% from 54% of a month ago.
In the Swiss economy, the Swiss National Bank (SNB) is expected to continue reducing interest rates in persistently low inflationary pressures. In February, the Consumer Price Index (CPI) rose 0.3%, faster than 0.2% estimates but decelerating from 0.4% in January.
The USD/CHF slides sharply after not being able to return to its maximum of 15 months around 0.9245. The perspective of the Swiss frank torque has become uncertain since it has fallen below the 20 -week exponential (EMA) mobile average, which is negotiated about 0.8920.
The 14 -week relative force index (RSI) slides about 40.00. A bearish impulse would be activated if the RSI falls below that level.
The asset would face more falls towards the minimum of November 8, 0.8700 and the minimum of November 6, 0.8620 if it falls below the minimum of December 6, 0.8735.
On the other hand, a recovery movement above the psychological support of 0.9000 would boost the asset towards the maximum of February 28, 0.9036, followed by the round level resistance of 0.9100.
Weekly USD/CHF Graph
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.
