What are the Key Drivers of the USD/CHF?

One of the most popular currency pairs in the FX market, the US dollar to Swiss franc (USD/CHF rate) is a favourite among traders, with a huge daily trading volume, high liquidity and narrow spreads. It is known as the “swissie” and is one of the major currency pairs.

Why trade the swissie?

There are a few reasons why traders choose to trade the USD/CHF.

1. Hoge liquiditeit
   Obviously, this is a popular currency pair with many traders interested in it. Although the Swiss franc is not as liquid as other currencies, the USD/CHF currency pair is still considered liquid and is among the most traded major currency pairs.
2. Safe haven
   Its popularity increases when there is global uncertainty as both currencies are considered to be safe havens. The US dollar (USD), along with the Japanese yen (JPY) and Swiss franc (CHF) are considered safe-haven currencies and traders turn to them when there is increased risk and uncertainty. Safe haven currencies tend to rise as investors avoid risky assets and flee to the safety of more stable currencies.
3. Geopolitical events
   This is connected to the above reason. Traders prefer the USD/CHF when there is economic or political instability. Because Switzerland is neutral when it comes to many major geopolitical events, such as wars, this is also why it is a safe haven and traders prefer to trade the pair.

Onderwijs

The huge number of resources where you can learn about the latest developments in USD/CHF.

Trading correlation

The USD/CHF currency pair has a negative correlation with the EUR/USD pair. This means that when the USDCHF rises, the EUR/USD tends to fall, and vice versa.

Interesting facts about the USD CHF

• As a safe-haven currency, the Swiss franc strengthened against all major currencies during the “Great Recession” of 2007-2009. The USDCHF pair dropped to its lowest in August 2011 but rose higher before falling again after the Swiss National Bank got rid of the Swiss franc floor against the euro which pushed the Swiss franc higher against the euro and the US dollar. Before this, the Swiss franc had a floor exchange rate of 1.2 against the euro.
• The USD/CHF currency pair tends to rise when the EUR/USD falls, and vice versa. This negative correlation is also reflected in the USD/CHF’s behaviour against gold, as when gold prices rise the USD/CHF falls and vice versa.

What influences CHF?

• Swiss National Bank and monetary policy

The Swiss National Bank (SNB) is the central bank of Switzerland and is responsible for setting monetary policy and exchange rates. Unlike other central banks, the SNB does not use a particular money market rate to manage monetary conditions. Previously, it used FX swaps and repurchase agreements to influence the money supply and interest rates. When the Bank wants to increase liquidity, it buys US dollars (or other foreign currency) against Swiss francs. SNB officials can influence the Swiss franc through statements and comments regarding the currency, liquidity and money. Changes in monetary policy impact the currency.

• Macroeconomic releases

Economic data referring to Switzerland’s economy and market such as inflation, employment data, GDP rates and industrial production influence the Swiss franc.

• Cross exchange rates

The USD/CHF can be influenced by fluctuations in non-dollar exchange rates or cross-exchange rates. If the GBP/CHF rises, the CHF’s weakness could affect other currencies such as the US dollar.

• Positive correlation with the euro

The Swiss franc has a positive correlation with the euro due to the close ties between the Swiss economy and the Eurozone, specifically Germany. This relationship is most obvious in the negative correlation between the USD/CHF en EUR/USD. If the EUR/USD rises or falls sharply, then the USD/CHF will also rise or fall sharply but always in the opposite direction.

What influences the USD?

• Federal reserve monetary policy and economic data

The US dollar dominates the markets and is one of the most popular currencies. The greenback is most sensitive to US macroeconomic data such as the employment report, inflation and GDP, to name a few. But it is also very much influenced by interest rate decisions and general monetary policy announced by the US Federal Reserve Bank (Fed).

For example, the release of the Non-Farm Payroll can create significant movement in the USD and impact the USD/CHF pair.

• Economic and political news

Anything that affects the US economy and politics can also impact the greenback. Tensions between the US and China, wars, the US debt ceiling concerns and many more can push the USD up or down.

Trading CFDs on the USD/CHF

You can trade the USD/CHF with a contract for the difference (CFD). A CFD will allow you to trade the currency pair by holding a long position (anticipating that the price will go up) or a short position (expecting that the price will drop).

If you believe the USD will strengthen, then you buy CFDs. If you think the US dollar will fall against the CHF then you sell the USD/CHF.

Trading forex with IronFX

If you are just beginning and are new to trading, then IronFX is the ideal place to start. With more than 80+ currency pairs, super-thin spreads and flexible leverage, you can trade the USD/CHF and any other currency pairs with confidence.

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From advanced platforms to exceptional educational resources, such as webinars, courses, eBooks, podcasts and many more, as well as access to Trading Central’s services, beginners can sharpen their skills and get started with all the help they need. IronFX’s dedicated account managers and 24/5 friendly customer support are always on hand to provide appropriate guidance. Whether you want to enquire about opening an account or depositing funds, our team is very knowledgeable and can help you instantly.

By registering with IronFX, you will take the first step into online trading. After that, with the help of our team, our online resources and user-friendly platforms, you will gain a better understanding of trading. Make sure you have done your research and are always reading, researching and learning, as forex trading is a demanding activity. Keeping up to date with the latest market news and being aware of what moves your favourite currency pairs, will keep you informed so you can make better decisions.

Disclaimer:

This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced or hyperlinked, in this communication.