By ForexTime
Here are some Swiss Franc facts that may surprise you:
- CHF is best-performing G10 currency vs. USD so far this year
- SNB uses Swiss Franc to help achieve inflation target
- Swiss Franc is a safe haven currency
- USDCHF sees 55% larger-than-average moves on US CPI days so far in 2023
- Blomberg FX model: USDCHF to trade within 0.8645 – 0.8865 this week
1) CHF is the best-performing G10 currency so far in 2023
USDCHF has a year-to-date decline of more than 5% at the time of writing (stronger CHF + weaker USD = lower USDCHF).
The Swiss Franc (CHF) has overtaken the British Pound for the current title, after battling it out for most of July, with the former also boasting of an advance against all of its G10 peers for the year-to-date period:
Free Reports:
Get our Weekly Commitment of Traders Reports - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.
Download Our Metatrader 4 Indicators – Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter
2) The Swiss National Bank (SNB) has been allowing CHF to strengthen
This central bank uses the CHF exchange rate as a major tool for controlling inflation.
A stronger CHF means cheaper imports, and also more receipts from its exports, hence Switzerland’s consistent trade surplus.
Fun fact: Switzerland’s watch exports have grown by double-digits year-on-year (>10%) in 4 out of the first six months of 2023.
After over a decade of limiting the Swiss Franc’s strength, the SNB finally signalled in November 2022 that it’s ready to sell foreign currencies and let the CHF strengthen.
NOTE: The SNB exchanges foreign currencies back into Swiss Francs, which in turn drives up the value of the latter.
Furthermore, the SNB has maintained its willingness to keep hiking rates.
Such hawkish rhetoric comes despite inflation already falling within the central bank’s 0% – 2% CPI target range (Switzerland’s July CPI = 1.6%).
However, the SNB appears concerned that inflation may make a comeback later this year, hence expectations for another rate hike.
At the time of writing, overnight index swaps are pointing to a 60% chance that the SNB could hike by a further 25-basis points before 2023 ends.
NOTE: SNB only makes a rate decision once every quarter. Its next rate decision is due on September 21st.
Recall that, a currency tends to strengthen as markets continue to expect interest rates in that country to climb higher.
Hence, such expectations have aided the Swiss Franc to reach its strongest level against the US dollar in about 8 years.
Back in mid-July 2023, USDCHF dipped below 0.8600 for the first time since the SNB lifted the Swiss Franc’s cap against the euro back in 2015 which saw CHF skyrocketing (and USDCHF plummeting).
3) Swiss Franc is a safe haven currency
A safe haven is an asset that investors buy up with hopes of preserving their wealth in times of heightened fear and great uncertainty.
Consider how the Swiss Franc gained by 2.86% versus the US dollar for the month of March 2023, amid the banking turmoil in the United States as well as Switzerland.
Currently, with markets fearing a recession, that has also helped drive up the value of the safe haven Swiss Franc.
4) USDCHF sees 55% bigger one-day move on day of US inflation data release
So far in 2023, USDCHF tends to move by about 56 pips (between its highest to its lowest intraday price) on average within a single trading day.
However, that average intraday move soars up to 87 pips on the days that the US consumer price index (CPI) is released.
That’s a 55% increase in volatility!
Hence, brace for heightened volatility when the US CPI due is released this Thursday, August 10th!
Currently, economists are forecasting the following numbers for the upcoming US CPI report:
- CPI month-on-month (July 2023 vs. June 2023) = 0.2%
- Core CPI (excluding more volatile food and energy prices) month-on-month = 0.2%
- CPI year-on-year (July 2023 vs. July 2022) = 3.3% (a slight uptick from June’s 3% year-on-year increase)
- Core CPI year-on-year = 4.8% (matching June’s core CPI y/y number of 4.8%)
Potential scenarios:
- A set of CPI numbers that show US inflation is moderating further, which in turn allows the Fed to back away from a September rate hike, may drag USDCHF lower on the weaker US follar.
- Higher-than-expected CPI readings, which stoke fears of a resurgence in inflation that forces the Fed into yet another rate hike next month, may translate into a stronger US dollar and a higher USDCHF.
BONUS FACTS:
- At the lower-than-expected US CPI release on July 12th, USDCHF registered an intraday move of 139 pips!
- That was its biggest one-day DROP in % terms so far in 2023, and also its 3rd largest single-day move (both up and down) in percentage terms of the year so far.
In other words, if recent history is to be a guide, brace for a volatile USDCHF on US CPI release day.
5) USDCHF likeliest to trade within 0.8645 – 0.8865 this week.
According to Bloomberg’s FX model, there’s a 72% chance that USDCHF trades within the above-mentioned range over the next one-week period.
Here are some further key levels of interest for the immediate term:
POTENTIAL SUPPORT:
- 21-day simple moving average
- 0.864 – 0.866 region = lower bound of Bloomberg FX model forecast / area for choppy July price action
- 0.8600 = psychologically-important level
POTENTIAL RESISTANCE:
- 0.8800 = psychologically-important number
- 0.8820 = early-May low
- 0.886 region = upper limit of Bloomberg FX model forecast / 50-day simple moving average / upper bound of USDCHF downtrend since November 2022
- 0.89014 = June 2023 low
Article by ForexTime
ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com
- Canadian dollar declines after weak GDP data. Qatar threatens EU to halt natural gas exports Dec 24, 2024
- Goldman Sachs has updated its economic projections for 2025. EU countries are looking for alternative sources of natural gas Dec 23, 2024
- COT Bonds Charts: Speculator Bets led by SOFR 3-Months & 10-Year Bonds Dec 21, 2024
- COT Metals Charts: Speculator Bets led lower by Gold, Copper & Palladium Dec 21, 2024
- COT Soft Commodities Charts: Speculator Bets led by Live Cattle, Lean Hogs & Coffee Dec 21, 2024
- COT Stock Market Charts: Speculator Bets led by S&P500 & Russell-2000 Dec 21, 2024
- Riksbank and Banxico cut interest rates by 0.25%. BoE, Norges Bank, and PBoC left rates unchanged Dec 20, 2024
- Brent Oil Under Pressure Again: USD and China in Focus Dec 20, 2024
- Market round-up: BoE & BoJ hold, Fed delivers ‘hawkish’ cut Dec 19, 2024
- NZD/USD at a New Low: The Problem is the US Dollar and Local GDP Dec 19, 2024