Swiss franc soars as risk sentiment slides

The Swiss franc has edged upwards on Monday, after the currency jumped over 1 per cent at the end of the week. Currently, USD/CHF is trading at 0.9262, up o.22% on the day.

Investors flock to Swiss haven

Omicron, a new variant of Covid, has swept the world and sewed fear and panic in the financial markets. Travel restrictions were quickly enacted, but the variant appears to have spread without any trouble. The week ended in a panic, as oil prices and equities plunged, while safe-haven currencies such as the Swiss franc and Japanese yen soared higher.

USD/CHF took a nasty tumble on Friday, falling 1.21%. Such a steep decline for the relatively stable Swiss franc is extremely unusual, and this was the sharpest one-day drop since March 2020. Still, I don’t expect officials at the Swiss central bank, who loathe a strong franc, to lose any sleep. The Swissie remains at high levels and had recorded five straight winning sessions before Friday’s slide.

The Swiss franc has settled down on Monday, and it appears that Friday’s move was a blip. Still, it would be prudent for market participants to be prepared for volatility in the coming weeks. It’s clear that Omicron has spread very quickly, but how lethal is the new variant? Preliminary reports show that vaccinated persons who were infected with Omicron displayed only minor symptoms, and health officials are scrambling to determine if Omicron is a serious health threat or not.

Science takes time, but the markets, which hate uncertainty, want answers yesterday. We can therefore expect some volatility in the currency markets, especially with risk currencies, until more is known about Omicron. Investors will be anxiously scanning the headlines, looking for any information about Omicron. For now, this week’s key releases such as US nonfarm payrolls will be overshadowed by the latest developments with the Covid pandemic.

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USD/CHF Technical

• USD/CHF has support at 0.9183 and 0.9122
• There is resistance at 0.9339, followed by resistance at 0.9434

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