USD/CHF Price Analysis: Consolidates below 0.9000 as focus shifts to US Inflation

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.

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.

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.

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.

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.