USD/CHF Gains Ground Amid Improved US Data
USD/CHF is on the rise, with the US Dollar gaining strength due to recent positive data that have tempered expectations for aggressive rate cuts by the Federal Reserve (Fed). Here are the key factors contributing to this trend:
Strong US Labor and Inflation Data
- Recent data shows strong labor and inflation numbers, reducing the likelihood of significant rate cuts by the Fed.
- CME FedWatch Tool indicates a 92.1% probability of a 25-basis-point rate cut in November, with no expectation of a larger reduction.
Improved US Treasury Yields
- US Dollar Index (DXY) continues its winning streak, supported by improved US Treasury yields.
- 2-year and 10-year yields on US Treasury bonds stand at 3.94% and 4.03%, respectively, at the time of writing.
Swiss Franc and Safe-Haven Flows
- Rising tensions in the Middle East contribute to safe-haven flows, limiting the downside of the Swiss Franc.
- Swiss inflation rate fell to 0.8% in September, raising the probability of a rate cut by the Swiss National Bank (SNB) in December.
Upcoming Data Releases
Traders will be watching for Swiss Trade Balance data and US Retail Sales figures for further insights into market trends. Expectations are for positive growth in both areas, which could impact the USD/CHF pair.
Swiss Franc FAQs
What Is the Swiss Franc?
The Swiss Franc (CHF) is Switzerland’s official currency, valued based on market sentiment, economic health, and SNB actions. It was pegged to the Euro from 2011 to 2015, impacting its value significantly.
Why Is the Swiss Franc a Safe-Haven Asset?
CHF is considered a safe-haven asset due to Switzerland’s stable economy, strong export sector, and neutrality in global conflicts. Investors often turn to CHF in times of market stress.
How Does the SNB Impact the Swiss Franc?
The SNB meets quarterly to set monetary policy, aiming for low inflation. Higher interest rates strengthen CHF, while lower rates weaken it.
What Affects the Swiss Franc’s Valuation?
Macroeconomic data, economic growth, inflation, and central bank policies impact CHF valuation. Stability in the Eurozone also plays a crucial role due to Switzerland’s economic dependence on the region.