Forex News
- The Japanese Yen faces pressure against the US Dollar as hawkish Fed bets accelerate.
- Hot US CPI data has prompted fears of at least one Fed interest rate hike this year.
- The next major trigger for global markets will be the outcome of the Trump-Xi meeting.
The Japanese Yen (JPY) trades lower against the US Dollar (USD) during the European trading session on Wednesday, with the USD/JPY pair edging higher to near 157.70. The pair gains as the US Dollar (USD) strengthens due to growing expectations that the Federal Reserve (Fed) could deliver at least one interest rate hike this year.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.11% | 0.00% | 0.08% | 0.03% | 0.06% | 0.21% | 0.05% | |
| EUR | -0.11% | -0.12% | -0.06% | -0.06% | -0.06% | 0.09% | -0.09% | |
| GBP | -0.00% | 0.12% | 0.09% | 0.02% | 0.06% | 0.22% | 0.04% | |
| JPY | -0.08% | 0.06% | -0.09% | -0.04% | -0.01% | 0.11% | -0.02% | |
| CAD | -0.03% | 0.06% | -0.02% | 0.04% | 0.02% | 0.17% | 0.00% | |
| AUD | -0.06% | 0.06% | -0.06% | 0.01% | -0.02% | 0.15% | -0.01% | |
| NZD | -0.21% | -0.09% | -0.22% | -0.11% | -0.17% | -0.15% | -0.17% | |
| CHF | -0.05% | 0.09% | -0.04% | 0.02% | -0.01% | 0.01% | 0.17% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, holds close to the weekly high of 98.46 posted on Tuesday.
Hawkish Fed bets have escalated following the release of the United States (US) Consumer Price Index (CPI) data for April, which showed that inflationary pressures grew at a faster-than-expected pace. The data showed on Tuesday that the US headline CPI grew at a robust pace of 3.8% Year-on-Year (YoY) compared to 3.7% estimates and the previous reading of 3.3%.
According to the CME FedWatch tool, the odds of the Fed delivering at least one interest rate hike by the end of this year have increased to 35.3% from 23.5% seen before the US CPI data release.
In Wednesday’s session, investors will focus on the US Producer Price Index (PPI) data for April, which will be published at 12:30 GMT.
Going forward, the major trigger for the US Dollar and global markets will be the meeting between US President Donald Trump and Chinese leader Xi Jinping during Trump’s visit to Beijing this week.
Meanwhile, the Japanese Yen trades subduedly despite US Treasury Secretary Scott Bessent’s confirmation of joint efforts with Japan against excessive volatility in currency markets. Bessent’s confirmation resulted in a knee-jerk reaction in USD/JPY on Tuesday; however, it lacked follow-through.
Economic Indicator
Consumer Price Index (YoY)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Last release: Tue May 12, 2026 12:30
Frequency: Monthly
Actual: 3.8%
Consensus: 3.7%
Previous: 3.3%
Source: US Bureau of Labor Statistics
The US Federal Reserve (Fed) has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
MUFG’s Michael Wan describes how a stronger US Dollar environment emerged as United States (US) April Consumer Price Index (CPI) surprised to the upside and US yields climbed. He notes that bonds sold off sharply, with the US 10-year yield near a one-year high and markets starting to price a potential Federal Reserve (Fed) rate hike by mid-2027, reinforcing support for the US Dollar (USD).
Hot CPI drives yields and Dollar
"Markets were dominated by a hotter-than-expected US April CPI print together with Iran and oil price developments, and if anything it seemed that price action were already moving ahead of key developments."
"In particular, US headline inflation rose to 3.8% year-on-year, a three-year high driven by a 17.9% surge in energy costs — as the US-Iran ceasefire remained uncertain."
"Bonds sold off sharply, with the US 10-year yield rising to a near one-year high of 4.46% and the 30-year back above 5%, while rates markets began pricing in a Fed hike by mid-2027."
"Looking ahead today, the Trump-Xi summit in Beijing is the dominant geopolitical focus. On the data front, US April PPI is due, a key read following yesterday's CPI surprise, alongside a $25 billion 30-year Treasury auction that will test duration appetite."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- GBP/USD trades with mild gains near 1.3550 in Wednesday’s early European session.
- The positive outlook of the pair remains intact above the key 100-day EMA.
- The immediate resistance level is seen at 1.3630; the initial support level is located at 1.3540.
The GBP/USD pair trades on a positive note around 1.3550 during the early European trading hours on Wednesday. Nonetheless, the potential upside for the major pair might be limited, as UK political turmoil and ongoing tensions in the Middle East could weigh on the British Pound (GBP) against the Greenback.
UK Prime Minister Keir Starmer is facing rising pressure to set a date for his departure after elections across much of the country resulted in massive losses for his ruling Labour Party. While Starmer stated he will not resign, the resulting political "noise" and rising UK gilt yields have created localized pressure on the GBP.
Traders will closely watch the US Producer Price Index (PPI) report, which is due later on Wednesday. Markets expect the US PPI inflation to rise to 4.9% YoY in April from 4.0% in March. The core PPI, excluding volatile food and energy prices, is expected to show a rise of 4.3% YoY in April versus 3.8% prior. If the report shows a hotter-than-expected outcome, this could boost the US Dollar (USD) and create a headwind for the major pair.
Technical Analysis:
In the daily chart, GBP/USD holds a mild bullish bias as spot remains above the 20-day Bollinger simple moving average (SMA) and comfortably over the 100-day SMA, suggesting underlying dip-buying interest. The Relative Strength Index (RSI) hovers close to the mid-50s, hinting at steady rather than overstretched upside momentum while price grinds higher within the Bollinger envelope.
On the topside, immediate resistance emerges at the upper Bollinger band near 1.3630, where recent rallies could stall if buyers fail to extend the breakout. On the downside, initial support is seen at the 20-day Bollinger SMA around 1.3540, followed by the 100-day SMA at roughly 1.3483; a deeper pullback would then look to the lower Bollinger band near 1.3458 as a stronger floor.
(The technical analysis of this story was written with the help of an AI tool.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Danske Research Team notes global equities slipped modestly, with the S&P500, Nasdaq and Russell2000 all lower. Semi-conductors in the S&P500 underperformed after a strong prior run, while defensive sectors such as healthcare and staples led gains. Asian equities and US and European futures turned mostly higher, suggesting limited follow-through selling.
Global stocks see mild pullback
"Global equities ended the day lower by 0.3% yesterday, after being down 1% at the lows."
"For once, semi-conductors in the S&P500 were among the weakest performers closing 1.4% lower, after being down about 4.5% earlier in the day."
"We will not overdo conclusions on such setback after an impressive 35% run over the past month."
"The defensive sectors, led by healthcare and staples, were among the top performers with gains of 1.9% and 1.6%, respectively in a broad based defensive outperformance."
"S&P500 closed down 0.2%, Nasdaq 0.7% lower, and Russell2000 down about 1%."
"Asian equities are mostly in green this morning after an initial setback."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Commerzbank strategists note that USD/INR climbed to a new record high as elevated global Oil prices and firm domestic Dollar demand from importers weigh on the Indian currency. They highlight that Reserve Bank of India's (RBI) recent loosening of speculative FX curbs has renewed pressure on INR, while potential government emergency measures and Oil dynamics remain key for the pair in coming months.
Record high as Oil stays elevated
"In FX, USD-INR rose 0.3% to 95.63 yesterday, closing at a new record high."
"This was driven by firm domestic dollar demand from importers as global oil prices remained elevated due to the conflict in the Middle East."
"RBI’s decision in late April to loosen curbs on speculative FX positions has led to renewed pressure on INR."
"There are reports that the government is weighing possible emergency measures to curb non-essential imports and reduce outflows to support the INR."
"For now, elevated oil prices remain the key factor for INR."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
European Central Bank (ECB) Governing Council member and Governor of the Bank of France, François Villeroy de Galhau, said on Wednesday that the central bank must be ready to intervene in the second round effects.
Key quotes
The ECB must be ready to intervene on 2nd round effects.
We don't have enough info on core inflation yet.
Market reaction
At the time of writing, the EUR/USD pair is down 0.08% on the day at 1.1730.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- AUD/USD remains on the back foot for the second straight day amid a bullish US Dollar.
- The lack of follow-through selling warrants caution before positioning for further losses.
- The bullish technical setup backs the case for the emergence of dip-buying at lower levels.
The AUD/USD pair struggles to capitalize on the overnight bounce from the 0.7200 neighborhood and trades with a negative bias for the second straight day on Wednesday. Spot prices, however, lack bearish conviction and currently trade around the 0.7235 region as investors opt to move to the sidelines ahead of the Trump-Xi summit.
In the meantime, the US Dollar (USD) stands firm near its highest level in over one week amid reviving bets for an interest rate hike by the US Federal Reserve's (Fed), bolstered by Tuesday's hot US consumer inflation figures. Furthermore, fading hopes for a US-Iran peace deal underpin the USD's safe-haven status and contribute to capping the risk-sensitive Aussie. However, the Reserve Bank of Australia's (RBA) hawkish outlook continues to act as a tailwind for the AUD/USD pair.
Spot prices hold well above the 100-period Exponential Moving Average (EMA), keeping a mild bullish bias. Moreover, the Relative Strength Index (RSI) hovers just above the neutral 50 line, hinting at modest upside pressure. However, the Moving Average Convergence Divergence (MACD) flattens slightly below zero and suggests only tentative momentum, making it prudent to wait for acceptance above mid-0.7200s before placing fresh bullish bets on the AUD/USD pair.
On the downside, initial support is seen at the 100-period EMA around 0.7190, where a break would expose a deeper corrective pullback and weaken the current constructive tone. As long as the AUD/USD pair remains above this moving average, dips are likely to be contained, keeping the broader focus on whether buyers can sustain the recovery and build a more convincing advance in the sessions ahead.
(The technical analysis of this story was written with the help of an AI tool.)
AUD/USD 4-hour chart
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- Silver price posts fresh two-month high, slightly below $88, despite escalating hawkish Fed bets.
- Higher-than-expected US CPI data boosts hawkish Fed bets and strengthens the US Dollar.
- Investors await the Trump-Xi meeting in Beijing later this week.
Silver price (XAG/USD) trades firmly near $87.00 in the early European trade on Wednesday. Earlier in the day, the white metal posted a fresh two-month high of $87.82. The white metal reflects strength even as hot United States (US) Consumer Price Index (CPI) data for April has prompted fears of interest rate hikes by the Federal Reserve (Fed) this year.
As measured by the CPI, the US headline inflation accelerated to 3.8% Year-on-Year (YoY) from 3.3% in March. The inflation data was expected to rise further, but at a slower pace to 3.7%. The US core CPI – which excludes volatile food and energy items – grew at an annualized pace of 2.8%, faster than 2.7% estimates and the previous reading of 2.6%.
According to the CME FedWatch tool, the odds of the Fed delivering at least one interest rate hike this year have increased to 35.3% from 23.5% seen before the US CPI data release.
Theoretically, rising hawkish Fed bets bode poorly for non-yielding assets, such as Silver.
Higher-than-projected US inflation data has also strengthened the US Dollar (USD). As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades firmly near its weekly high of 98.46 posted on Tuesday. Technically, a higher US Dollar makes the Silver price an unfavorable risk-reward bet for investors.
Meanwhile, investors await the meeting between US President Donald Trump and Chinese leader Xi Jinping during Trump’s visit to Beijing on May 13-15.
In India, the Multi Commodity Exchange (MCX) Silver July Futures have gained over 6% above Rs. 3,00,000, as the Indian government has hiked import duty on Gold and Silver to 15% from 6%, in an attempt to discourage the purchase of precious metals due to ease pressure on the nation’s foreign exchange reserves.
Silver technical analysis
XAG/USD trades firmly at around $87 as of writing. On the daily chart, the pair extends its advance well above the 20-day Exponential Moving Average (EMA) at $78.68, suggesting a firm bullish near-term bias as price holds comfortably over dynamic support.
The Relative Strength Index (14) hovers near 66, indicating strong but not yet extreme upside momentum that reinforces the broader constructive tone while leaving room for further gains.
On the downside, initial support is seen at the 20-day EMA around $78.68, followed by the May 1 high around $77. As long as XAG/USD remains above the EMA floor and momentum readings stay elevated, the technical setup favors dips being bought. Looking up, the Silver price could gain further towards $90 if it manages to break above its intraday high of $87.82; a close above that would open room for further advancement towards the March high of $96.62.
(The technical analysis of this story was written with the help of an AI tool.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- USD/CHF flat lines near 0.7805 in Wednesday’s early European session.
- Chinese and US leaders will hold talks in Seoul ahead of a high-profile leaders’ summit.
- SNB is expected to hold rates at zero through 2026, according to Reuters poll.
The USD/CHF pair trades on a flat note around 0.7805 during the early European trading hours on Wednesday. Traders await the key US inflation data and continue to assess the developments surrounding US-China talks later this week.
The South China Morning Post reported on Wednesday that US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng will hold trade and economic talks in South Korea ahead of US President Donald Trump's official visit to China.
The Trump-Chinese President Xi Jinping summit will take place in Beijing on Thursday and Friday. Earlier on Tuesday, Trump said that he would prioritize trade discussions during his summit with Chinese President Xi Jinping, and downplayed the amount of attention they would devote to the Iran war.
The US Producer Price Index (PPI) report will take center stage later on Wednesday. Markets expect the headline US PPI to show a rise of 4.9% YoY in April, compared to 4.0% in March, while the core PPI is projected to show an increase of 4.3% YoY in April versus 3.8% prior. Any signs of hotter inflation in the US could fuel bets on Federal Reserve (Fed) interest rate hikes later this year, which support the Greenback against the Swiss Franc (CHF).
The Swiss National Bank (SNB) has kept its policy rate unchanged at 0%. Reuters economists predict rates will hold at zero throughout the remainder of 2026, forcing the bank to rely primarily on currency intervention to control Franc strength.
"The SNB is not willing to introduce negative rates at this stage as the bar remains higher than back in 2015 ... We continue to expect the SNB to remain on hold for the foreseeable future," said Nikolay Markov, lead economist at Pictet Asset Management.
Swiss Franc FAQs
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.
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