USD/CHF remains capped below 0.8070 ahead of US PPI, claims data
- The US Dollar's recovery attempt from 0.8025 lows has been contained at 0.8070
- Market volatility remains subdued ahead of the US PPI and Jobless Claims data
- Speculation about negative interest rates in Switzerland is weighing on the CHF.
The US Dollar bounced up against the Swiss Franc on Thursday. Still, upside attempts have been capped below 1.3870, leaving the pair in no man’s land ahead of the release of US Jobless Claims and Producer Prices Index figures, due later today.
US Jobless Claims are expected to have increased by 2,000 for the third consecutive week, to 228,000 claims. These figures add to the evidence of a softening labour market, and endorse the views of Fed interest rate cuts in September.
Investor’s enthusiasm, however, might be capped by US Producer Price Index numbers, out at the same time, and expected to have accelerated in July. The headline inflation is seen at 0.2% on the month and 2.5% year-on-year, up from 0% and 2.3% respectively in June.
Likewise, the Core CPI is seen accelerating 0.2% in July, after a flat performance in June, while yearly inflation is foreseen at 2.9%, up from 2.6% in the previous month. Investors are wary of a larger-than-expected increase in producer prices, which might cast a shadow ot September’s Fed cut.
The Swiss Franc, on the other hand, remains on its back foot. The hefty trade tariffs introduced by US President Trump and the soft inflation figures seen recently suggest that the SNB might be forced to cut rates into negative territory to support economic growth.
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.
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