So far this week the Swiss Franc has gained ground against the Greenback, advancing 0.20 percent and closing yesterday's session at the 1.1014 level.
Last week the Swiss Franc broke a 10-week gaining streak, losing 0.28 percent against the US dollar, making this gain remarkable. As it is known, the Swiss Franc tends to outperform when risk aversion dominates the markets and investors run towards "safer assets" while tending to lose value when risk appetite takes over. Nevertheless, despite that stocks are currently rallying, given the enormous amount of cash that is being injected into the system, the Swiss currency has managed to remain resilient.
It seems that the persistent weakness of the dollar, fueled by the Federal Reserve's decision to expand its balance sheet in a considerable way and given the effects of the coronavirus outbreak in the performance of the US economy, has been favoring the performance of the Swiss Franc. This week, the dollar lost 0.16 percent against a bundle of its main competitors, giving up the previous week's gains. Another factor that may be favoring the performance of the Swiss Franc is the drop in inflation-adjusted bond yields, mainly caused by the Federal Reserve's recent activities.
Economic Calendar
Last week, the markets still don’t know a lot about the state of Switzerland's economy. Both imports and exports rose, pushing down the trade surplus to 2.58 billion Francs in July after being at 2.74 billion in the previous month. Exports gained 2.3 percent (year-to-year), slowing down from the previous month's figure which showed an 8.1 percent gain. Additionally, imports climbed 1.1 percent after gaining 5.1 percent in June.
This week, Swiss Statistics has released the quarterly Employment Level figure, which decreased to 5.095 million in the second quarter after being at 5.132 million in the previous quarter. This left the unemployment rate at 4.6 percent in the second quarter, increasing from the previous quarter's 4.2 percent. The ZEW Survey Expectations Index, published by the Centre for European Economic Research, showed that in August business and employment conditions improved, standing at 45.6 after being at 42.4 during the previous month.
The coronavirus crisis continues advancing in Switzerland, with 40,262 confirmed cases as well as 2,002 total deaths. Cases have been rising steadily since the end of June, hitting its highest level in four months on Friday last week.
The late performance of the Swiss Franc might push the Swiss National Bank to intervene in the market to hinder the pernicious effect of the excessive appreciation of the currency in the Swiss economy. A strong currency tends to make export less competitive, a scenario that the Swiss policymakers don't take lightly.
This is not a new problem, given the status of the Swiss Franc as an ultimate safe haven, which tends to favor its performance despite the fact that Switzerland currently has the lowest interest rates in the world, at -0.75 percent. Now that the rest of the central banks in the developed world are determined to ease further their monetary policy stances to counter the effects of the sanitary crisis on their economies, the Swiss National Bank insists on keeping its ultra-loose monetary policy, though it is pretty conscious about the impossibility of cutting the cash rates indefinitely.