Swiss Franc steadies against Greenback after morning rout caused by stickier US inflation – Crypto News – Crypto News
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Swiss Franc steadies against Greenback after morning rout caused by stickier US inflation – Crypto News

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  • The Swiss Franc weakens marginally against the US Dollar on Thursday after the release of US inflation data. 
  • The data shows headline inflation coming out at 3.4%, beating estimates and previous results.
  • Core inflation, however, shows less upside pressure and moderates down YoY. 

The Swiss Franc (CHF) is down just a tenth of a percent against the US Dollar (USD) on Thursday afternoon after sinking by half a percentage point earlier in the day. The release of mostly higher-than-expected US inflation data caused the sell-off as the data suggests that the Federal Reserve (Fed) may delay cutting interest rates in order to keep up its war against inflation. Since higher interest rates attract more foreign capital inflows, the news is bullish for the US Dollar.

However, the US Dollar strength dissipated somewhat in the US afternoon session. The Swiss Franc is still down more significantly against the Euro and Pound Sterling on Thursday.

Daily digest market movers: Swiss Franc adjusts lower after USD gets inflation-data pump

  • The Swiss Franc edges down against the US Dollar after US inflation data for the month of December shows continued price pressures.  
  • The Consumer Price Index (CPI) for December showed a 3.4% rise YoY in December, which was above the 3.2% forecast and the 3.1% registered in November. 
  • CPI on a monthly basis, came out at 0.3% compared to analysts’ estimates of 0.2%. 
  • Annual Core CPI came out slightly lower at 3.9%, compared to the 4.0% of November, but this was still more than the 3.8% expected. 
  • With a rise of 0.3%, Core CPI on a monthly basis came out in line with expectations and the same as the 0.3% in November.  
  • The release of the CPI data led to a slight fall in the market-gauged probabilities of the Federal Reserve cutting interest rates at its meeting in March 2024, from the upper 60s% to the lower 60s%. 
  • That the odds still favor a Fed rate cut in March, however, still stands in contrast to the Swiss National Bank (SNB), which remains silent on the subject of bringing down interest rates.
  • At the SNB’s last monetary policy meeting in December, the SNB Chairperson Thomas Jordan, avoided committing to cutting rate cuts, giving vague reasons relating to geopolitical risks. 

Swiss Franc technical analysis: USD/CHF in long-term downtrend 

USD/CHF – the number of Swiss Francs (CHF) that one US Dollar (USD) can buy – rises on Thursday, extending the pair’s short-term recovery rally. 

The USD/CHF pair is in a long-term downtrend, however, suggesting the pair is at risk of recapitulating and continuing lower.  

US Dollar vs Swiss Franc: 4-hour Chart 

The four-hour chart shows the pair pulling back after bottoming at the late November lows. The short-term trend is indeterminate, and given the broader bearish bias ultimately at risk of resuming its downtrend. 

The recovery since the November lows has stalled and appears trapped in a range. The speed of ascent of the recovery is slower than the down move that preceded it – a further sign of weakness. 

A break below the December consolidation range lows at 0.8465 would probably indicate a resumption of the downtrend back down to the November lows at 0.8332. 

It would take a break above the major trendline for the downmove at around 0.8600 to confirm a change in the short-term trend and more upside. But the next target after that would be the 200-four-hour Simple Moving Average (SMA) not much higher at circa 0.8630.

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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