USD/CHF seems fragile near 0.7900 as US Dollar underperforms
- USD/CHF struggles near its three-week low of 0.7880 amid a weakened US Dollar.
- The US Dollar faces pressure as Trump is expected to announce the Fed’s next Chairman soon.
- SNB’s Schlegel said that negative inflation prints are possible this year.
The USD/CHF pair trades with caution during the late Asian trading session on Friday, near its over three-week low of 0.7880 posted on Tuesday. The Swiss Franc pair remains on the back foot as the US Dollar (USD) falls into a frying pan after coming out from fire.
During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades close to its two-week low of 98.26.
US Dollar Price Last 7 Days
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.27% | -0.92% | -0.08% | -0.81% | -2.19% | -2.94% | -1.69% | |
| EUR | 1.27% | 0.36% | 1.19% | 0.46% | -0.94% | -1.68% | -0.43% | |
| GBP | 0.92% | -0.36% | 0.86% | 0.11% | -1.29% | -2.04% | -0.78% | |
| JPY | 0.08% | -1.19% | -0.86% | -0.72% | -2.11% | -2.86% | -1.61% | |
| CAD | 0.81% | -0.46% | -0.11% | 0.72% | -1.40% | -2.15% | -0.90% | |
| AUD | 2.19% | 0.94% | 1.29% | 2.11% | 1.40% | -0.75% | 0.51% | |
| NZD | 2.94% | 1.68% | 2.04% | 2.86% | 2.15% | 0.75% | 1.29% | |
| CHF | 1.69% | 0.43% | 0.78% | 1.61% | 0.90% | -0.51% | -1.29% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The US Dollar regained ground after disputes over Greenland’s entitlement between the United States (US) and the European Union (EU) were settled, following the meeting between President Donald Trump and NATO Secretary General, Mark Rutte, in which they reached a framework for Greenland’s future deal.
US President Trump also rolled back 10% tariffs imposed on several EU members and ruled out the possibility of acquiring Greenland by force.
Meanwhile, fears among market participants that decisions by the new Federal Reserve (fed) Chairman will favor Trump’s economic agenda that central bank’s dual mandate have pushed the US Dollar on the back foot again. Trump announced on Thursday that he will soon announce Fed Chair Jerome Powell’s successor.
In Switzerland, Swiss National Bank (SNB) Chairman Martin Schlegel has stated that there could be some negative inflation prints this year while speaking at the sidelines of the World Economic Forum (WEF) at Davos on Wednesday. However, Schlegel pushed back hopes of negative interest rates, citing that the bar for an ultra-dovish monetary policy stance is still very high.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
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