Following the intervention conducted by Swiss National Bank straight after the announcement of referendum results in the UK, the pair USD/CHF has been growing for the fourth consecutive week.
Although Swiss economy is in the relatively good condition, (unemployment rate in the country is one of the lowest in Europe and in the world (about to 3%)), some economists believe that GDP growth in Switzerland will not exceed the level of 1% - 1.5% in the next three to five years.
The data released at the beginning of this month showed the decline in inflation and consumer confidence. Actual volume of retail sales fell in June (-1.6% in June on annual basis vs. -1.9% in May).
Another important indicator of the state of Swiss economy, PMI SVME, assessing business conditions in the manufacturing sector of Switzerland, also fell in June (51.6 in June against the forecast of 55.4 and 55.8 in May).
Traditionally, National Bank of Switzerland reiterates that national currency is overvalued, which according to SNB impedes economic growth in the country. Current interest rate on deposits in Switzerland is in negative territory, at the level of -0.75%.
However, although the lowering of the Franc’s status as a safe currency asset, (due to the actions by SNB in the currency market), Franc is still in demand among investors.
With the decrease of concerns associated with Brexit, investors’ risk appetite is increasing, which is demonstrated by the rise in the world stock indices. Demand for the USD is also increasing. Note that despite the turbulence in global financial markets, the Fed continues monetary policy tightening.
Comments of the Fed representative about it are very reserved.
Improvement in the global markets sentiments can change expectations of the interest rate increase in the USA, given that concerns about consequences of Brexit are decreasing, and the number of new jobs in the USA has grown in June. These facts will support the demand for the USD, and for the pair USD/CHF.