Market Overview

2 September 2022

Swiss Franc: From Strength to Weakness

The Swiss Franc has been steadily declining against the U.S. Dollar since the middle of August. Since then, the USDCHF moved up from 0.937 to 0.982, or by 5%. This is primarily related to the strength of the Greenback amid multiple signals from the Federal Reserve (Fed) concerning further monetary tightening to combat inflation which has reached its highest level in the past 40 years. The U.S. Dollar index (DXY) has been gravitating towards its highest levels since the fall of 2002 to reach above 109.2 points. Over this period, the Swiss currency also fell victim to the Greenback.

The USDCHF opened September trades with a move from 0.975 to 0.981. Consumer prices went up in Switzerland in August to 3.5% year-on-year, beating the forecast of 3.4%. Retail sales in July rose by 2.6% vs 0.9% expected. This incoming data supported the Franc a little as USDCHF slowed down below 0.9800.

The Swiss economy is in a far better condition than the rest of Europe and the United Kingdom. It has bigger GDP growth and lower inflation and unemployment levels that provide strength to the national currency. While the Euro and the British Pound are at lows not seen for several years  to the U.S. Dollar, the Swiss Franc is in a much better situation. The Pound and the Euro fell to the Dollar by 7.4% and 6.6% respectively during the summer season while the Franc lost only 1.5% during the last three months.

Even though the Swiss currency is better off than others, it looks pale against the monstrous strengthening of the Greenback that is expected to continue to gain. So, with this said, the Swiss Franc may continue to lose strength towards 0.9900, or even to the parity at 1.0000 vs the Dollar, where it was located in May-June this year. The Non-Farm Payrolls data, that will be released this Friday, will most likely affect the pair. A serious slowdown in the creation of U.S. jobs is expected as only 300,000 or less new jobs are forecasted to have been created in August from a strong 528,000 indication over the previous month. In this case the Franc may continue its correction towards 0.9600-0.9650. A stronger U.S. labour market may push the Greenback further up and reach above the indicated resistance levels.



Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.


Mark Goichmann
Market Focus

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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