USD/CHF remains above 0.8000 following improved Swiss Employment Level
- USD/CHF holds gains as the Swiss Franc remains subdued despite improved non-farm payrolls data.
- Switzerland’s Employment Level increased 0.6% YoY in the second quarter, reaching 5.532 million.
- Fed Chair Powell stated that risks to the labor market are increasing, while noting that inflation remains a concern.
USD/CHF inches higher after registering nearly 1% losses in the previous session, trading around 0.8020 during the Asian hours on Monday. The pair remains stronger following the improved Switzerland’s non-farm payrolls data.
Swiss Employment Level rose 0.6% year-on-year to 5.532 million in the second quarter, matching the pace of the previous period. The gain was largely supported by the services sector, which rose 0.9% to 4.402 million.
The Swiss government announced last week that it will intensify efforts to enhance the country’s appeal as a business hub after the US imposed 39% import tariffs on Swiss goods. Measures will include easing regulatory burdens for Swiss companies, with the government noting that costly new rules could be delayed.
The USD/CHF pair may lose ground as the US Dollar (USD) could struggle amid the rising likelihood of a US Federal Reserve (Fed) interest rate cut in September. Traders will likely await the upcoming release of the Q2 US Gross Domestic Product Annualized and July Personal Consumption Expenditures - Price Index data, the Fed's preferred inflation gauge.
Fed Chair Jerome Powell said, at the Jackson Hole symposium on Friday, that although unemployment is still low, pressures on the labor market are mounting and monetary policy remains “restrictive,” suggesting that adjustments could be necessary. He also highlighted shifts in tax, trade, and immigration policies as important forces reshaping the economic outlook.
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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