USD/CHF eases to 0.8050 following dovish comments by Fed’s Daly
- The US Dollar pulls back from mid-term highs at 0.8080 but remains on track for a strong weekly performance.
- San Francisco Fed President has hinted at further interest rate cuts in the coming months.
- Later today, the US Michigan Consumer Sentiment Index is expected to endorse Fed doves' positions.
The US Dollar is posting moderate losses against the Swiss Franc on Friday. The pair eased from six-week highs at 0.8080 to levels near 0.8050, but remains on track for its best weekly performance since April after having rallied 1.4% in the last five days.
San Francisco Fed President Mary Daly added some bearish pressure on the US Dollar earlier on Friday, pointing to further interest rate cuts in the coming months, as she described the labour market as a “worrisome” point.
Later today, the US Michigan Consumer Sentiment Index is expected to provide one of the few data points after the US government’s closure last week. The Index is expected to reflect a further deterioration of consumers’ confidence, which will provide additional reasons for Fed doves.
In Switzerland, the economic calendar has been light this week, but the tame inflation data and the weak consumption and business activity data released last week are feeding expectations that the SNB might be forced to adopt negative interest rates and keep the Swiss Franc under pressure.
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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