USD/CHF pair posts a fresh three-month low around 0.8760 at the start of the week. The pair weakens as the safe-haven demand of the Swiss Franc (CHF) increases amid deepening concerns over the United States (US) economic outlook.
Investors see the US economy to face economic turbulence in the near term as the "America First" agenda of President Donald Trump is expected to result in a slowdown in the overall demand. On Friday, Trump said in an interview with Fox News that there is a period of "transition", because what we are doing is very "big".
Fears of a US growth slowdown have prompted expectations that the Federal Reserve (Fed) could cut interest rates in the June policy meeting. According to the CME FedWatch tool, the likelihood for the Fed to cut interest rates in June has increased to 82% from 54% a month ago.
In the Swiss economy, the Swiss National Bank (SNB) is expected to continue reducing interest rates amid persistently lower inflationary pressures. In February, the Consumer Price Index (CPI) rose by 0.3%, faster than estimates of 0.2% but decelerated from 0.4% in January.
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.
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.
Source: Fxstreet
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