- USD/CHF depreciates as the US Dollar pulls back, registering around 0.50% gains on Friday.
- The stronger US jobs data for May increased the odds of the Fed keeping rates unchanged at its June meeting.
- The latest Swiss CPI and GDP data raised the odds of SNB delivering a 25 basis point rate cut in next meeting.
USD/CHF halts its two-day winning streak, trading around 0.8210 during the Asian hours on Monday. The pair’s depreciation is attributed to the US Dollar (USD) pullback after posting around 0.50% gains on Friday. The Greenback received support from stronger-than-expected United States (US) labor market data for May, raising expectations that the Federal Reserve (Fed) will keep its benchmark interest rate unchanged at its next two monetary policy meetings.
US Nonfarm Payrolls (NFP) posted 139,000 new jobs added new jobs in non-agricultural businesses in May, higher than the market consensus of 130,000. Moreover, the Unemployment Rate remained steady at 4.2% and the Average Hourly Earnings remained unchanged at 3.9%, both readings came in stronger than the market expectation.
However, the downside of the USD/CHF pair could be restrained as the US Dollar may appreciate amid easing trade-war tensions. Moreover, improved risk sentiment may weaken safe-haven demand for the Swiss Franc (CHF). US President Donald Trump and China’s Xi Jinping spoke and agreed on Thursday that officials from both sides would soon resume trade negotiations aimed at ending the trade war. US Treasury Secretary Scott Bessent and two other Trump administration officials are set to meet with Chinese officials on Monday.
Last week, the Swiss Consumer Price Index (CPI) fell by 0.1% year-on-year in May, slipping below the Swiss National Bank’s (SNB) 0-2% target range and marking the first deflationary reading since March 2021. Also, Swiss GDP grew by 0.5% quarter-on-quarter in the first quarter, improving from a revised 0.3% in Q4 of 2024. The latest economic figures boost the expectations of the Swiss National Bank (SNB) cutting 25 basis points, bringing down the interest rate to 0% from the current 0.25%, in its June meeting.
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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