The USD/CHF pair is growing slightly during the Asian session on Friday and is trading at 0.7675. Despite the local recovery, the pair still remains near multi-year lows, which indicates that the franc is significantly overbought in the face of ongoing economic uncertainty.
A key factor in supporting the US currency was the reduction of short-term political risks in the United States after President Donald Trump and Democratic senators reached an agreement on financing the government. The probability of a shutdown over the coming weekend has significantly decreased, which improved sentiment and temporarily weakened demand for defensive assets, including the Swiss franc.
Market participants are closely following the announcement of the candidacy of the new chairman of the Federal Reserve System (FRS), which, according to Trump, should take place in the coming hours. Kevin Warsh, a former Fed member, is considered the likely favorite. It is obvious that President Donald Trump will seek to appoint a candidate who meets his requirements, especially in terms of aggressively lowering the key interest rate, which keeps the market concerned about the Fed’s independence. Most analysts are confident that with the change of the Fed’s leadership, the final politicization of the American regulator will take place, after which decisions on rates will be made based on the interests of the Republican Party, rather than current economic conditions. With that said, the appointment of a new Fed chairman poses a risk that could lead to increased pressure on the dollar. Later on Friday, data on the producer price index (PPI) in the United States for December will be released. Any signs of a decrease in inflationary pressure can increase the chances that the Fed will resume rate cuts as early as the March meeting. This also puts an additional burden on the dollar.
As for the Swiss currency, the head of the Swiss National Bank, Martin Schlegel, previously made it clear that, despite the strengthening of the franc, the regulator is still not considering the possibility of returning to negative interest rates. This position only increases the attractiveness of the Swiss currency as a defensive asset in the face of unprecedented volatility in global financial markets.
USD/CHF Sell Stop 0.7650 TP 0.7500 SL 0.7700
