Swiss Franc Eyes Fresh Gains On Safe Haven Appeal
The Swiss franc has lost some ground against other major currencies in recent trading sessions. For starters, it is trading at two-week lows against the Euro, which has tumbled to two-year lows in recent months. While the weakness of the Swiss franc stems from weak economic data, a bounce-back could be in the offing going forward.
Swiss Franc Safe Haven Appeal
The Swiss franc is likely to edge higher as geopolitical and economic tensions continue to edge higher. The currency’s safe-haven appeal should come into play in what promises to be yet another busy week in the financial markets.
Focus on the financial markets will be on the powerful Chinese delegation headed to Washington, led by Vice Premier Liu Hu. Trade talks between the U.S. and China are scheduled to commence on Thursday. Given the uncertainty that comes with such talks, the Swiss Franc should experience some level of volatility as a haven in times of uncertainty.
The Brexit Impasse is another headwind expected to continue driving traders and investors into safe havens such as the Franc and the Japanese Yen. Prime Minister, Boris Johnson, is under immense pressure to reach an agreement with the EU ahead of the October 31, 2019 deadline. With legislators planning to block a no-deal Brexit, the impasse looks set to continue.
While the Swiss Franc has pared its advance for the year to 3%, it could elicit some strengthen depending on the outcome of developments on the global scene. Even on the Swiss National Bank moving to cut interest rates in a bid to ease monetary policy to counter slowing inflation, weakness in the franc is not expected
Weakness on the Swiss franc is not expected in part because the European Central Bank, as well as the Federal Reserve, have already cut interest rates in the recent past.
The U.S. has also cut interest rates even on the economy remaining resilient compared to other major economies in the world.
Euro, Yen, Pound Outlook
While the franc looks set to steady, the Euro is likely to continue bouncing from current two-year lows. The formation of a bullish crossover is already eliciting suggestions that the Euro has hit bottom and due for a correction higher. The Euro has so far found support at the $1.0970 level from where a bounce-back could come calling.
The British pound, on the other hand, could experience some level of volatility as traders continue to digest the Brexit uncertainty. Parliament, which is at the center of Brexit negotiations, will remain suspended on October 8 ahead of state opening followed by a speech by the Queen.
The Yen, just like the Swiss franc, is also likely to continue edging higher amid growing cautions of the U.S and China reaching a trade agreement. The U.S Dollar, on the other, has lost its upward momentum as traders reacted to weak employment data that missed expectations. The biggest economy in the world added 136,000 jobs in September down from 168,000 recorded in August.