USD/CHF has seen gains in each of the opening four months this year. But in May trading, the pair looks set for its first monthly decline now. A chunk of that will owe to today’s drop, after having seen a bounce off key support at 0.9000 earlier this month.
The combination of a stronger dollar and a quick shift by the SNB to rate cuts in March has helped to precipitate the rise in USD/CHF this year. The Swiss central bank made their move as inflation pressures look to be coming well under control. However, there is still lingering uncertainty as evident with things in the US, Europe, and UK.
So, the SNB must not be too complacent in their approach. If the franc also continues to weaken, that might invite more inflation down the road for the Swiss economy. And as SNB president Jordan outlined earlier here, that is the key risk that they have to watch out for right now.
If they are to cut rates further, it will see more pressure on the franc. But at the same time, they’d be hoping to avoid too much of that so as to not stir up higher inflation.
The risk backdrop earlier today was rather sluggish and it was a good a time as any for the SNB to work some of their magic. But we’re now seeing mixed flows in European morning trade, though the franc is still unfazed and sitting at the highs for the day.
But in the case of USD/CHF, there is still key support closer to 0.9000 at this stage. As long as that holds, the pair can still maintain a more bullish momentum in the bigger picture.
This article was written by Justin Low at www.forexlive.com.
Source link
