Created
: 2025.01.17
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USD/CHF stays above 0.9100, faces potential downside risks due to dovish Fed stance
World FX news
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USD/CHF stays above 0.9100, faces potential downside risks due to dovish Fed stance
New
2025.01.17 14:22
2025.01.17 14:22
2025.01.17 14:22
- USD/CHF may continue to decline as market sentiment increases that the Fed will lower interest rates twice this year.
- US Retail Sales rose by 0.4% MoM in December, falling short of the market expectations of a 0.6% rise.
- The safe-haven Swiss Franc may struggle as Israel and Hamas have reportedly agreed to a peace deal.
USD/CHF remains steady following three days of losses, hovering near 0.9110 during the Asian trading hours on Friday. However, the pair faced challenges as the US Dollar (USD) extended losses after the weaker US Retail Sales data released on Thursday.
US Retail Sales rose by 0.4% MoM in December, reaching $729.2 billion. This reading was weaker than the market expectations of a 0.6% rise and lower than the previous reading of a 0.8% increase (revised from 0.7%).
Growing expectations that the Federal Reserve (Fed) will cut interest rates twice this year have driven US Treasury bond yields lower, with the 2-year and 10-year notes currently at 4.23% and 4.60%, respectively. Both yields are on course for a weekly decline of over 3%.
The USD/CHF pair faces challenges as the US Dollar Index (DXY), which tracks the USD's performance against six major currencies, remains under pressure for the fifth consecutive session, trading near 109.00.
Chicago Federal Reserve Bank President Austan Goolsbee stated on Thursday that he has grown increasingly confident over the past several months that the job market is stabilizing at a level resembling full employment, rather than deteriorating into something worse, according to Reuters.
The safe-haven Swiss Franc (CHF) may face headwinds as geopolitical tensions in the Middle East ease. Israel and Hamas have reportedly agreed to a deal to pause the conflict in Gaza after 15 months of war. According to CNN, the agreement is expected to take effect on Sunday, pending approval by the Israeli cabinet.
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.
Last updated
: 2025.01.17
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2025.01.17 22:36USD/CAD jumps to near 1.4430 as investors turn cautious ahead of Trump's inauguration
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2025.01.17 22:20US Dollar stabilizes after Fed Waller alludes to March rate cut
The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, further consolidates around the 109.00 level on Friday, though positioning is being torn into two camps.
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2025.01.17 21:35Gold retraces on Friday but weekly gains nearly secured
Gold's price (XAU/USD) slightly retraces but holds above the $2,700 level on Friday, with some profit-taking occurring after its three-day rally this week. Federal Reserve (Fed) governor Christopher Waller spooked traders by commenting on Thursday
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2025.01.17 20:48USD/CNH: To trade most likely between 7.3380 and 7.3550 - UOB Group
Flat momentum suggests further range trading, most likely between 7.3380 and 7.3550. Upward momentum is beginning to fade; a breach of 7.3250 would suggest that 7.3700 is not coming into view, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.
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2025.01.17 20:44USD/JPY: Bearish bias on the day - OCBC
USD/JPY continued to trade lower, as expectations on BoJ hike next week continues to build. Markets are pricing in 22bp hike at the upcoming MPC (vs. 11bp hike expectations at the start of the new year). Pair was last at 155.69 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.
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2025.01.17 20:39USD/JPY decline is likely part of a lower range - UOB Group
Weakness has not stabilized, but any further US Dollar (USD) decline is likely part of a lower range of 154.90/156.15. In the longer run, USD remains weak; if it breaks below 154.90, the next objective will be at 154.40, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.
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2025.01.17 20:34DXY: Dip may find support in the interim - OCBC
US Dollar (USD) was a touch softer overnight, helped by dovish comments from Fed's Waller. He said that Fed may cut rates more this year and sooner than investors expect if future inflation data fall in line with Dec CPI report.
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2025.01.17 20:30NZD/USD: Expected to trade sideways between 0.5580 and 0.5630 - UOB Group
New Zealand Dollar (NZD) is expected to trade sideways between 0.5580 and 0.5630. In the longer run, NZD must break and remain above 0.5650 before a move to 0.5695 is likely, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.
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2025.01.17 20:25Disclaimer:
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