USD/CHF remains depressed below 0.8000 amid a moderate market optimism
- The US Dollar remains capped below 0.8000 near 14-year lows.
- Hopes of trade deals and revived concerns about US debt are weighing on the USD.
- The KOF business barometer reflects a deteriorating economic outlook in Switzerland.
The US Dollar is unable to put any significant distance from last week’s long-term low at 0.7960 area, as the pair remained capped below 0.8000 on Monday, with hopes of trade deals and reviving fears about the US fiscal health weighing on the Greenback’s recovery.
News that the US and China have reached an agreement on the key rare earths issue and the resumption of the negotiations with Canada, which were broken on Friday, have boosted investors’ sentiment on Monday.
Furthermore, US Treasury Secretary Scott Bessent suggested an extension of the July 9 deadline until September 1. This gives further margin to the US and its main trading partners to reach significant agreements and has contributed to lifting investors’ spirits on Monday and keeping USD upside attempts limited.
Apart from that, the US sweeping tax bill, which is expected to add from $3 to $4 billion to an already swollen US Government debt, is making its way through the Senate. This bill has boosted concerns about a debt crisis in the US and is likely to be an added source of negative pressure for the USD.
In Switzerland, the KOF Leading Indicator deteriorated to 96.1 in June from 98.6 in May, against expectations of an improvement to 99.3. The study warns about a particular downward tendency on the general business situation and foresees a deteriorating economic outlook. The negative impact on the Swiss Franc, however, has been subdued.
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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