USD/CHF pares previous losses and returns above 0.7950 amid a stronger US Dollar
- The US Dollar crawls higher following a two-day reversal and returns above 0.7950
- Trade uncertainty and dovish Fed minutes hit the US Dollar on Tuesday and Wednesday.
- The Swiss Franc is drawing support from dwindling hopes of negative SNB rates.
The US Dollar is featuring a moderate recovery on Thursday, paring some losses after the previous two days’ reversal. The pair, however, remains trading near long-term lows, with upside attempts capped below the 0.8000 psychological level.
The Greenback extended losses on Wednesday after the minutes of the latest Federal Reserve’s Monetary Policy Meeting revealed a deep division among policymakers, with the majority of the MPC showing willingness to reduce borrowing costs in the next months.
Traders ramped up expectations of an at least 25 basis point rate cut in September, according to the CME Group’s Fed Watch Tool, and put an end to a five-day rally on US Treasury yields. The US Dollar Index, which measures the value of the Greenback against the six most-traded currencies, retreated from its highs.
In Switzerland, the stronger–than-expected inflation data seen in June has silenced speculation that the Swiss National Bank would be the first major bank to adopt negative interest rates, which is providing some support to the Swiss Franc.
Later today, the US Weekly Jobless Claims will provide further clues about the health of the US labour market, ahead of speeches from Fed officials Waller and Daly, who have been advocating for a less restrictive monetary policy in previous weeks.
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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