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Swiss Franc Weakens vs. Commodity Currencies on Market Sentiment

January 5, 2021 at 14:58 by Vladimir Vyun

Swiss franc banknotes - 20The market sentiment was still favoring riskier currencies over safer ones, and that reflected in the performance of the Swiss franc. The Swissie declined against commodity currencies while holding steady versus other rivals. The worse-than-expected domestic inflation data did not seem to have a material impact on the franc.

Switzerland’s Federal Statistical Office reported that the Consumer Price Index fell by 0.1% in December after declining by 0.2% in November. Experts had predicted no change. Year-on-year, the index fell by 0.8% versus the median forecast of a 0.7% decline. The report explained the decline by lower prices for international package holidays, petroleum products and for air transport.

According to yesterday’s report from Procure the seasonally adjusted manufacturing Purchasing Managers’ Index climbed from 55.2 in November to 58.0 in December. The reading above the neutral 50.0 level of no change indicates that the sector was accelerating with increasing pace. The report commented on the result:

The Purchasing Managers’ Index (PMI) for manufacturing industry indicates that the recovery in Swiss manufacturing is continuing as we head into 2021, despite the second wave of Covid-19. Switzerland’s high dependency on exports and the robust conditions in Asia in particular are likely to be proving advantageous in this regard.

The market sentiment was largely positive despite the emergence of a new strain of the novel coronavirus as market participants were hoping that the COVID-19 vaccines will help to stop another wave of the pandemic and will help to reignite global economic recovery. The optimism was detrimental to currencies deemed to be a safe haven, including the Swiss franc. There were still factors that may yet drive investors to seek safety, like the elections in the US state of Georgia and a renewed lockdown in the United Kingdom.

USD/CHF fell from 0.8812 to 0.8802 as of 14:57 GMT today, reaching the session minimum of 0.8789 intraday. CAD/CHF rose from 0.6896 to 0.6905. NZD/CHF gained from 0.6319 to 0.6348.

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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