Swiss Franc Pairs: CHF finishes week lower after mixed Swiss GDP
- The Swiss Franc weakens after Q3 GDP data comes out mixed – YoY missing estimates; QoQ beating.
- CHF finds a floor against US Dollar as sentiment improves for the Greenback.
- EUR and GBP stabilize against Swiss Franc after a steep sell-off.
The Swiss Franc (CHF) weakens on Friday after the publication of mixed GDP data for the third quarter. On a YoY basis, the Swiss economy grew by 0.3% in Q3 versus the 0.5% expected, according to the State Secretariat of Economic Affairs. Quarter-on-quarter, however, GDP gained more than expected, helping to balance out the poor YoY result.
Most of the Swiss Franc’s major pairs found a floor on Friday after ferocious sell-offs. USD/CHF may have hammered out a low after a turnaround in bearish sentiment towards the US Dollar. EUR/CHF halted its steep decline after the Swiss GDP data. GBP/CHF likewise seems to have halted its decline.
Daily digest market movers: USD/CHF rebounds after USD finds favour
- The Swiss Franc weakens marginally after Swiss GDP growth in Q3 came out lower than analysts had forecast on a YoY basis – 0.3% vs 0.5% expected.
- The QoQ figure, however, showed an unexpected 0.3% gain versus the 0.1% expected and the 0.1% decline previously.
- The US Dollar recouped earlier losses from lower-than-expected PCE inflation data and surprise dovish commentary from Federal Reserve Board Member Christopher J. Waller.
- With global data dipping and inflation cooling in most major economies, investors now see interest rates at risk of coming down all over the world, not just in the US.
- Commentary from Federal Reserve Chair Jerome Powell on Friday is being eyed for further guidance prior to the next Fed meeting’s blackout period begins.
Swiss Franc technical analysis: USD/CHF hammers out a floor
USD/CHF – the number of Swiss Francs that one US Dollars can buy – is an overall downtrend on the short and medium-term timeframes, and in a long-term range.
Overall, the trend is biased to extend lower. The next major target to the downside is the round number level at 0.8600, followed by the 2023 low of 0.8552. A break below Thursday’s 0.8683 lows would provide bearish confirmation.
US Dollar vs Swiss Franc: Daily Chart
The pair has just found a floor at key long-term range lows and formed a textbook hammer Japanese candlestick pattern on Thursday. If Friday ends bullishly and closes above Wednesday’s open at 0.8780, it would confirm the hammer reversal and probably signal the beginning of a short-term recovery for the pair.
It is possible the pair has formed a measured move price pattern since the October 3 highs (see chart above). Measured moves are three wave patterns that look like large zig-zags. The first and third waves are usually of a similar length. If this is the case, then there is a possibility wave C may have completed. This would suggest a lull in selling pressure and the possibility of a short-term recovery. Given price has not started rising very strongly yet, however, this is still highly speculative, and the trend remains down.
Daily digest market movers: EUR/CHF ends blood-letting as ECB officials play down rate cuts
- The Swiss Franc weakened after Swiss GDP data failed to meet estimates in Q3 on a YoY basis. QoQ GDP data, however, beat estimates, helping to balance out the figures.
- The Euro weakened considerably on Thursday after flash estimates showed the Eurozone Harmonised Index of Consumer Prices (HICP) inflation decelerated more than anticipated, to 2.4% YoY in November from 2.9% in the previous month.
- Core Eurozone HICP increased by 3.6%, substantially down from October’s final print of 4.2% and missing market expectations for a 3.9% rise.
- The data suggested a risk the European Central Bank (ECB) might consider cutting interest rates, and weighed heavily on the Euro.
- Lower interest rates tend to weaken a currency as they lead to lower capital inflows.
- Despite the lower-than-expected inflation data, ECB officials have said that it may be too early to reduce interest rates.
Swiss Franc technical analysis: EUR/CHF sell-off abates
EUR/CHF – the number of Swiss Francs that one Euro can buy – fell off a cliff midweek and into Thursday. As the week comes to a close, however, it has recovered some ground and is now trading just above a major support and resistance line at 0.9520, which held up prices during the summer.
Euro vs Swiss Franc: Daily Chart
The pair is in a downtrend on all timeframes, suggesting bears have the upper hand and prices should continue lower.
A break below the 0.9470 lows would confirm the bearish bias and see prices fall to the next key support area at the 0.9417 October lows.
Daily digest market movers: GBP/CHF remains supported by hawkish outlook for BoE
- The Swiss Franc loses ground against the Pound Sterling on Friday after mixed Swiss GDP data.
- Bank of England officials are maintaining a hawkish line as inflation in the UK remains well above target, supporting the Pound.
- Interest rate-setter Megan Greene from the Bank of England expressed concerns about persistently high inflation, indicating that interest rates might need to remain elevated for an extended duration. This perspective contrasts with some recent data suggesting a potential downturn in the economy.
Swiss Franc technical analysis: GBP/CHF bouncing around on long-term range floor
GBP/CHF – the number of Swiss Francs that one Pound Sterling can buy – is broadly in a sideways trend. Thursday’s sell-off found a floor at 1.1000, a significant long-term support level and the bottom of the range.
The pair is currently trading just above support from the 50-day Simple Moving Average (SMA, Red).
Pound Sterling vs Swiss Franc: Daily Chart
Buyers and sellers are evenly balanced. A buy signal from MACD on the weekly chart coincided with the October lows. This was followed by the recovery witnessed in late October and early November. There is a chance of this move continuing. A break above the 1.1150 highs and the consolidation zone formed in early November would provide confirmation of further upside, which could see the pair claw its way back up to the long-term range highs just below 1.1500.
Swiss Franc FAQs
What key factors drive the Swiss Franc?
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.
Why is the Swiss Franc considered a safe-haven currency?
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.
How do decisions of the Swiss National Bank impact the Swiss Franc?
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.
How does economic data influence the value of the Swiss Franc?
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.
How does the Eurozone monetary policy affect the Swiss Franc?
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.