The USD/CHF pair rose for the fifth straight day on Thursday, with the pair receiving strong support from the broad strength of the US Dollar (USD) as markets take a cautious stance ahead of the September Non-Farm Payrolls (NFP) report due at 13:30 GMT.
At the time of writing, USD/CHF is trading around 0.8073, its highest level in nearly two weeks, as the Swiss Franc (CHF) remains on the defensive.
The US dollar’s bullish momentum is being driven by a reassessment of the Federal Reserve’s near-term monetary policy outlook. Markets are now less confident about a rate cut in December, with the CME FedWatch tool showing just a 31.8% chance, down from about 50% a week ago.
The main factor behind the latest repricing was the postponement of the October employment situation report, after the US Bureau of Labor Statistics (BLS) confirmed on Wednesday that the government shutdown prevented officials from collecting critical data. The missing October numbers are now scheduled to be published alongside the November jobs report on December 16th, which limits the amount of labor market information available to the Fed before the FOMC meeting on December 9-10.
Minutes from the October FOMC meeting further supported the dollar’s tone, showing a hawkish bias among participants. Policymakers noted that inflation rose earlier in the year and remained above the 2% target, while progress toward combating inflation has stalled. Many participants claimed that further rate cuts may not be appropriate in December.
However, the next batch of delayed US data could be pivotal and could help reshape market expectations. Economists expect the September nonfarm payrolls report to rise by about 50,000, which would represent an improvement from the modest increase of 22,000 seen in August.
In Switzerland, the latest trade figures were broadly supportive, with October data showing a strong rise in both exports and imports. However, the upbeat numbers had a limited impact on the Swiss franc, as the strength of the US dollar continues to dominate broader forex flows.
Traders now turn their attention to comments from Swiss National Bank President Martin Schlegel, who is scheduled to speak on Friday and may provide new clues about the policy outlook. The Swiss National Bank (SNB) will issue its next interest rate decision in December, with analysts widely expecting the central bank to keep interest rates unchanged at 0%.
Swiss National Bank FAQs
The Swiss National Bank (SNB) is the country’s central bank. As an independent central bank, its mission is to ensure price stability in the medium and long term. To ensure price stability, the Swiss National Bank aims to maintain appropriate monetary conditions, which are determined by the level of the interest rate and exchange rates. For the Swiss National Bank, price stability means that the Swiss CPI rises by less than 2% per year.
The Governing Council of the Swiss National Bank (SNB) decides the appropriate level of the interest rate in accordance with the goal of price stability. When inflation is above target or expected to be above target in the foreseeable future, the bank will attempt to tame excessive price growth by raising the interest rate. Higher interest rates are generally a positive for the Swiss Franc (CHF) because they lead to higher returns, making the country a more attractive place for investors. Conversely, low interest rates tend to weaken the Swiss franc.
Yes. The Swiss National Bank (SNB) regularly intervenes in the foreign exchange market to avoid the Swiss franc (CHF) from appreciating too much against other currencies. A strong Swiss franc hurts the competitiveness of the country’s strong export sector. Between 2011 and 2015, the Swiss Central Bank implemented a peg to the euro to limit the advance of the Swiss franc against it. The bank intervenes in the market using its huge foreign exchange reserves, usually by purchasing foreign currencies such as the US dollar or the euro. During periods of high inflation, especially due to energy, the SNB refrains from intervening in markets because a stronger Swiss franc makes energy imports cheaper, cushioning the price shock for Swiss households and companies.
The Swiss Central Bank meets once every three months – in March, June, September and December – to assess its monetary policy. Each of these assessments leads to a decision on monetary policy and the publication of medium-term inflation expectations.
