USD/CHF steady ahead of SNB decision

USD/CHF is steady in Thursday trading. Early in the North American session, the pair is trading at 0.9210, up 0.14% on the day.

Will SNB comment on franc’s strength?

The Swiss National Bank (SNB) will hold a policy meeting on Thursday. The central bank is expected to keep interest rates at -0.75%. Although this is one of the lowest interest rates in the world, that has not discouraged investors from snapping up the safe-haven Swissie, at a time of great upheaval and uncertainty due to the global downturn caused by the Covid-19 pandemic. This has led to a significant appreciation in the value of the Swiss franc, causing consternation for SNB policymakers. USD/CHF has climbed 4.1% since June 1st.

Investors should keep an eye on the bank’s rate statement (also known as the  Monetary Policy Assessment), as any discussion about the franc’s strength could impact on the currency. Although Covid-19 appears here to stay for quite some time, there have been signs of a global economic recovery, which could invigorate risk appetite and reduce demand for the Swiss franc, which would be music to the ears of the Swiss National Bank.

Switzerland’s GDP plunged 8.2% in the second quarter, marking the worst quarter on record. However, there have been encouraging signs that the economy is on a rebound in Q3. Manufacturing PMI climbed to 51.8 in August, up from 49.2 in July. A reading above the 50-level indicates expansion. Retails sales rose 4.0% y/y in July, compared to 3.3% y/y in June. As well, the KOF Economic Barometer surged to 110.2 in August, up sharply from 86.0 in July. Ironically, the economic recovery will make the Swiss franc more attractive in investors, at a time when the SNB is uneasy about the currency’s appreciation.

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USD/CHF Technical

• 0.9225 is under strong pressure in resistance. Close by, there is resistance at 0.9252
• There is support at 0.9154. This is followed by support at 0.9110, which is protecting the 0.9100 line
• USD/CHF broke above the 50-day MA line on Tuesday, which is a signal of an upward trend

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