USD/CHF nears two-month lows at 0.7910 with US jobs in the spotlight
- The US Dollar drops against the Swiss Franc for the third consecutive day, approaching key support levels.
- Concerns about a sharp downward revision of US jobs are hammering the US Dollar.
- Further evidence of labour market deterioration might prompt the Fed to deliver a jumbo cut next week.
The US Dollar extends losses for the third consecutive day against the Swiss Franc on Tuesday. The market awaits the release of the benchmark revision of the US Nonfarm Payrolls data, which is expected to show a sharp deterioration of the US labour market.
The USD/CHF pair has depreciated about 0.2% so far today and reached intraday lows of 0.7920. A depressed Greenback is nearing the 23 July low, at 0.7910, the last hurdle before a key support level at 0.7872, the lowest levels since 2011.
The USD struggles ahead of the NFP’s benchmark revision
The US Bureau of Labour Statistics will disclose the revision of US employment figures for the last 12 months to March, which is expected to show a net loss of up to 800,000 jobs in the period, according to market sources.
Such a revision would reveal that the labour market deteriorated beyond expectations in the period, adding pressure on the Federal Reserve to accelerate its monetary easing cycle.
Last year’s NFP benchmark revision showed an 818,000 net loss in employment, and the central bank cut interest rates by 50 basis points at their September 2024 meeting.
In the Swiss calendar, it highlights the SNB President Martin Schlegel’s conference on Wednesday. The SNB chief is expected to reiterate last week’s comments, playing down the possibility of cutting interest rates into negative levels, citing undesirable side effects for savers and pension funds.
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
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