What are the Key Drivers of the USD/CHF?

The US dollar to Swiss franc (USD/CHF) is one of the most popular currency pairs in the FX market. Traders favour it because it offers high liquidity, a large daily trading volume, and narrow spreads. Many traders also refer to this pair as the “swissie,” and it remains one of the major currency pairs.

Why trade the swissie?

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

1. Mataas na Liquidity
   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
   The pair often becomes even more popular during times of global uncertainty because both currencies act as safe havens. The US dollar (USD), Japanese yen (JPY), and Swiss franc (CHF) all fall into this category, and traders move toward them when risk increases. As a result, safe-haven currencies usually rise in value as investors pull away from risky assets and seek stability in stronger currencies.
3. Geopolitical events
   This ties directly to the previous point. Traders often prefer the USD/CHF when economic or political instability increases. Switzerland’s long-standing neutrality in major geopolitical events, including wars, strengthens its safe-haven status. Because of this stability, many traders turn to the pair during uncertain times.

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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

• During the “Great Recession” of 2007–2009, the Swiss franc strengthened against all major currencies because of its safe-haven status. The USD/CHF pair reached its lowest point in August 2011. It then moved higher, but later fell again after the Swiss National Bank removed the franc’s floor against the euro. That decision pushed the Swiss franc higher against both the euro and the US dollar. Before the change, the franc had a minimum exchange rate of 1.2 per 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) serves as Switzerland’s central bank and sets the country’s monetary policy and exchange-rate framework. Unlike many other central banks, the SNB does not rely on a specific money market rate to guide monetary conditions. In the past, 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 currencies in exchange for Swiss francs. SNB officials can also move the franc by making statements about the currency, liquidity, or the broader money environment. Any shift in monetary policy directly affects the value of the Swiss franc.

• Macroeconomic releases

Economic data from Switzerland, such as inflation, employment figures, GDP growth, and industrial production, all influence the value of 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 often moves in line with the euro because Switzerland’s economy is closely linked to the Eurozone, especially Germany. This connection becomes even clearer when you look at the negative correlation between USD/CHF at EUR/USD. When EUR/USD rises or falls sharply, USD/CHF usually does the same but 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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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.