Swiss Franc Slightly Up On Improved Economic Sentiment

Swiss Franc Slightly Up On Improved Economic Sentiment
April 26, 2019

 

The Swiss franc started strengthening yesterday after turning out to be the worst performing highly-traded currency in April. After recording significant losses against some of its G10 rivals, the franc seems to be reversing the trend, with minor gains in the last two days of this trading week. With no crucial domestic economic data scheduled to be released today, the franc’s direction is much dependent on global cues. In the past 24 hours, the USD/CHF currency pair has declined to 1.1090, after opening at 1.0228.

The Switzerland Economic Sentiment Index, a measure of investor expectation, had a print of -7.7 in April, reflecting a 19.2-point improvement from March’s -26.9. This is the best figure since July 2018, as poll participants foresee economic downturn to reach an end soon.

The Zew Economic Sentiment Index, a measure of the current economic scenario, jumped to 40.70 in April, from 33.30 in March. The poll takes into account the opinion of 350 financial and economic analysts.

Notably, the Swiss unemployment rate currently stands at a four-month low of 2.5% (non-seasonally adjusted) in March 2019, down from 2.7% in the earlier month.

Furthermore, the first-quarter results issued by the Swiss National Bank (SNB) on Tuesday indicates that the central bank made a profit of CHF30.1 billion, implying that fluctuations in its strong balance sheet are resulting in such solid earnings. The Q1 figures indicate that the SNB generated CHF29.30 billion profit from its foreign currency positions, roughly CHF0.9 billion from gold holdings, and about $0.5 billion from its Swiss franc positions. In the same period last year, the central bank made a loss of CHF6.80 billion.

Undoubtedly, the figures suggest that everything in monetary policy is pretty quiet. This indicates that the central bank may not have to meddle with the monetary policy soon, particularly with the franc weakening by the same level as in the past month. The benchmark interest rate in Switzerland is -0.75%. That means the Swiss National Bank currently charges an interest of 0.75% on assets held beyond a threshold level by domestic banks. The central bank is ready to intervene in the market, if necessary to ensure a weak franc.

With the US dollar mercilessly marching ahead against all other currencies, the Swiss franc may find it difficult to gain further against the US dollar. So, fundamentally, the USD/CHF pair may remain range-bound in the short-term. As no major domestic economic data is scheduled for the rest of the week, investors will be looking at the global market for signals.

The historical price chart indicates that the USD/CHF pair is facing resistance at 1.0215. The next minor support is only at 1.0140. The MACD indicator remains flat, implying a lack of momentum. As a result, in the short-term, we can expect the currency pair to remain range-bound with a slight bearish bias.

CHF - technical analysis - 26th April 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Ian Maguire

Ian Maguire

Ian is our resident contributor to the latest going ons in the cryptomarket, keeping up to date with the latest icos and coins


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