Swiss franc hits 9-year high

The Swiss franc is slightly lower in Wednesday trade. In the North American session, USD/CHF is trading at 0.8509, down 0.31%.

The Swiss franc continues to power higher and has climbed 2.5% against the slumping US dollar in the month of December. The Swissie has pummelled the greenback in 2023, gaining 7.7%, and is trading at its highest level since January 2015.

The Swiss National Bank has been buying Swiss francs during the year in order to boost its value and dampen inflation. This strategy has been successful but has come at a price, as the strong Swiss franc has made Swiss exports less competitive in global markets. The inflation rate is within the SNB’s target range of 0%-2% and the SNB’s inflation forecasts are also within the target range. This means that the central bank will likely decrease its currency intervention next year so long as there are no significant risks of inflation rising above 2%.

SNB unlikely to cut rates

The SNB has held the cash rate at 1.75% for two straight months and may have ended its rate-tightening cycle. The SNB has inflation right where it wants and there is little reason for the central bank to cut rates at this stage. The cash rate is not in restrictive territory as it is close to the expected level of inflation, which means that previous rate hikes are not hurting the economy, unlike the case in the US or the UK.

It’s a light data calendar between Christmas and New Year’s in the US. We’ll get a look at the Richmond Manufacturing Index today, with a market consensus of -6, compared to the -5 reading in November. On Thursday, unemployment claims are expected to drop to 205,000, down from 210,000 a week earlier.

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USD/CHF Technical

• USD/CHF is testing support at 0.8518. Below, there is support at 0.8479
• 0.8550 and 0.8559 are the next resistance lines

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