Swiss franc slips to 9-week low

The Swiss franc has posted slight losses to start the week. In North American trade, USD/CHF is trading at 0.9209, down 0.16% on the day.

Swiss franc slides as Fed signals tighter policy

The Swiss franc is coming off a dreadful week, after a spanking from the rejuvenated US dollar. USD/CHF climbed 2.77% last week, its best weekly showing since March 2020. At the start of last week, the pair was trading below the symbolic 90 level.

The catalyst for the Swissie’s downturn was, not surprisingly, the FOMC meeting, at which the Fed brought up the timeline for rate hikes in its dot plot. The dollar made further inroads as the Swiss National Bank maintained interest rates at -0.75%, the lowest rate of any major central bank.

The monetary policy divergence we are seeing from the US and Swiss central banks has soured investors on the Swiss currency. The Fed sees rates moving as high as 0.6% in 2023, which clearly makes the dollar much more attractive than the Swissie as far as interest rates.  The Swiss franc offers stability as a safe-haven currency, but with the US economy performing well, risk appetite has grown and investors are more willing to look at alternatives to the Swiss dollar. The Swiss National Bank is all smiles with the Swiss franc taking a bath, as a weaker franc makes Swiss exports more attractive.

The global recovery is also good news for the Swiss economy, which is heavily reliant on its export sector. Last week, a key Swiss government economic forecast (SECO) raised its GDP forecast for 2021 to 3.6% and projected above-average growth in 2022. Domestic activity is also on the rebound after a difficult winter due to the Covid pandemic, so the Swiss economy should enjoy a strong H2 in 2021.

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USD/CHF Technical

• USD/CHF faces resistance at 0.9420 and 0.9327
• On the downside, there is support at 0.9054. Below, there is support at 0.8874

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