The Swiss franc weakened slightly against the greenback on Wednesday, pulling back from a record level reached in the earlier Asian session. Stop losses were triggered after the dollar spiked down to 0.8669.
The US Dollar has been continuously weakening against the Swiss Franc in recent weeks, with the greenback weighed down by expectations that the U.S. Federal Reserve will not change its current loose monetary policy. The Fed will release a report following the conclusion of a two-day meeting ending on Wednesday.
Meanwhile, the EURCHF trend which had moved higher from the March may need to consolidate now. Since the Asian session spike down, the EURCHF is now up over 120 pips and is currently trading at 1.2860. The pair opened the European trading session at 1.2817.
USCHF is currently trading at 0.8767. The pair opened at 0.8729 to hit as high as 0.8772.
Many traders expect the Dollar index, which is a measure of the greenback against a basket of currencies, to descend to an all-time low to break the 2008 low, based on expectations that the Fed will not tighten monetary policy soon.
Credit Suisse analyst, Marcus Hettinger commented that: “Since early this year relative monetary policy has been the driving force of the currency markets.”
He added, “We think the Fed is unlikely to raise interest rates over the next 12 months, which should support the euro and perhaps the franc over next couple of months, though interest rate spreads will likely be priced in by later in the year.”
The Fed’s stance on monetary policy is in sharp contrast with that of the European Central Bank, which raised its benchmark rate by 25 basis points last month and looks likely increase again due to the threat of rising inflation. This may give an example to the Swiss National to raise rates in Switzerland.