USD/CHF consolidates around 0.9060-0.9065 area, above two-week low set on Wednesday
- USD/CHF lacks any firm intraday direction, though it manages to hold above a two-week low.
- A further recovery in the US bond yields underpins the USD and lends some support to the pair.
- A positive risk tone weighs on the safe-haven CHF and supports prospects for further gains.
The USD/CHF pair struggles to capitalize on the previous day's modest bounce from the 0.9035-0.9030 area, or over a two-week low and oscillates in a narrow range during the Asian session on Thursday. Spot prices currently trade around the 0.9060 region, nearly unchanged for the day amid subdued US Dollar (USD) price action.
The USD Index (DXY), which tracks the Greenback against a basket of currencies, struggles to capitalize on the overnight bounce from the monthly low amid bets that the Federal Reserve (Fed) will cut interest rates twice this year. That said, an uptick in the US Treasury bond yields acts as a tailwind for the buck, which, in turn, is seen lending support to the USD/CHF pair.
Meanwhile, Swiss National Bank (SNB) Chairman Martin Schlegel's ultra-dovish comments, opening doors for negative interest rates, might continue to weigh on the Swiss Franc. Apart from this, the underlying bullish tone around the equity markets could undermine the safe-haven CHF and further contribute to limiting any meaningful downside for the USD/CHF pair.
Traders also seem reluctant and might opt to wait on the sidelines ahead of US President Donald Trump's speech at the World Economic Forum for more concrete announcements on tariffs. This, in turn, could infuse volatility in the global financial markets and influence the USD price dynamics, which, in turn, should provide some meaningful impetus to the USD/CHF pair.
Traders on Thursday will further take cues from the release of the US Weekly Initial Jobless Claims data, due later during the early North American session. Nevertheless, the aforementioned fundamental backdrop warrants caution before positioning for an extension of the recent pullback from the 0.9200 mark, or the highest level since May 2024 touched earlier this month.
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.