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USD/CHF Slides As FX Markets Prepare for Raucous 2020 Election

November 3, 2020 at 14:36 by Andrew Moran

10, 20, 50 and 100 Swiss franc banknotesThe Swiss franc is carving out a direction on Tuesday as investors brace for the 2020 US presidential election, comb through the latest inflation and manufacturing data, and determine if Switzerland can successfully mitigate COVID-19 without decimating the economy. With the world in the home stretch of a raucous 2020, can the conventional safe-haven asset continue its appreciation by year’s end?

According to the Swiss Federal Statistical Office (SFSO), consumer prices declined 0.6% year-over-year in October, keeping the national economy in a state of deflation for the ninth consecutive month. But this was also the smallest drop in the consumer price index (CPI) in seven months. The largest decreases were concentrated in transportation, recreation and culture, health care, housing, and energy. The biggest boosts were situated in apparel, restaurants, food, alcoholic beverages, and education.

In October, the procure.ch manufacturing purchasing managers’ index (PMI) came in at 52.3, down from 53.1 in September. Despite the fall, the manufacturing PMI represented the third consecutive monthly gain, driven by a rebound in output and new orders. Employment did drop to a three-month low.

Later this week, consumer confidence and foreign exchange reserves data will be published.

The Swiss government has been striking a fine balance between reopening the country and attempting to combat the coronavirus pandemic. The government recently reported more than 8,600 new infections as it has allowed retail businesses and restaurants to keep open. That said, policymakers have mandated that in-person college classes be suspended, announced that restaurants must close at 11 p.m., and ordered masks to be worn in packed offices and secondary schools.

The latest measures come as some hospitals and intensive care units (ICUs) are beginning to reach full capacity. Medical authorities say the system could reach a breaking point in ten days.

Health Minister Alain Berset told reporters in Bern:

We have to work with a scalpel and make very precise cuts. If it’s not possible to get the virus under control, then other measures are possible. But we’re trying to take a middle path.

The country appeared to have contained the COVID-19 outbreak earlier this year, but the country witnessed a spike in confirmed cases in the middle of September. In total, Switzerland has 176,000 confirmed cases, with a death toll of 2,130.

Meanwhile, the Swiss National Bank (SNB) posted another quarter of profits as the central bank made billions from its enormous holdings of foreign currency investments. According to the SNB, third-quarter profits hit $15.77 billion from stocks, bonds, and gold.

The USD/CHF currency pair tumbled 0.53% to 0.9143, from an opening of 0.9190, at 13:29 GMT on Tuesday. The EUR/CHF rose 0.08% to 1.0711, from an opening of 1.0701.

If you have any questions, comments, or opinions regarding the Swiss Franc, feel free to post them using the commentary form below.

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