Market activity is subdued on Wednesday in thin post-holiday trade. In the European session, USD/CHF is almost trading at 0.9280, down 0.14%.
Over the final two months of the year, the Swiss franc has looked sharp against the US dollar. USD/CHF tumbled 5.6% in November and is down another 1.6% in December. The pair fell as low as 0.9215 on December 14th, its lowest level since April. The Swiss National Bank (SNB) is keeping a close eye on the appreciation of the Swiss franc, as this makes Swiss exports more expensive. The SNB has shown that it is not shy about intervening in the currency markets if it believes that the Swissie exchange rate is too high.
The SNB has joined the global tightening party in 2022, raising interest rates into positive territory after years of sub-zero rates. The SNB delivered an oversize rate of 0.50% earlier this month, bringing the cash rate to 1.00%. The central bank had an accommodative monetary policy in place for years in order to combat deflation. In the new era of rising inflation, the SNB has switched gears, with 175 basis points of tightening this year. Switzerland’s inflation rate of 3% is much lower than in the eurozone, but this is above the SNB’s target of 0-2%. At the December meeting, the SNB said it would not rule out further tightening, which will largely depend on inflation forecasts. If inflation does not ease, there is a strong likelihood of another rate hike in March.
ZEW Economic Expectations climbs
It’s a very light calendar this week in Switzerland, with just two events. Earlier today, ZEW Economic Expectations showed a strong improvement with a reading of -42.8 in December, up from -57.5 in November and above the consensus of -50.5 points. This is a step in the right direction, but the latest reading was the 10th straight in negative territory. On Friday, we’ll get a look at the KOF Economic Barometer, which has been on a downturn. The consensus stands at 86.9 for December, following 89.5 in November.
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USD/CHF Technical
- USD/CHF is putting pressure on support at 0.9256. Below, there is support at 0.9159
- There is resistance at 0.9377 and 0.9498
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A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.