Swiss franc falls to 3-month low

The Swiss franc is slightly lower on Friday. In European trade, USD/CHF is trading at 0.9271, up 0.18% on the day. The pair has gained 1.06% this week, as the Swiss franc is at its lowest level since April.

Switzerland’s manufacturing sector continues to show strong growth. The June Manufacturing PMI came in at 66.7, well above the expansion/contraction threshold of 50 points. The reading was lower than the previous release of 69.9 and the estimate of 69.7, but at these high levels of expansion, investors are unlikely to focus on a small downturn. With the global economy showing improvement, the Swiss manufacturing sector should continue to show strong growth in H2 of 2021.

The Swiss franc is on a downswing, which is sweet music to the ears of policymakers at the Swiss National Bank (SNB). In order to keep Swiss exports competitive on world markets, the SNB intervenes in the currency markets to curb the value of the franc. The SNB sold some 110 billion francs in 2020, but has massively scaled back on such purchases this year, selling only 296 million francs in the first quarter. The devastating economic downturn caused by Covid in 2020 sent jittery investors flocking to safe-haven assets like the franc. Now that the major economies are showing steady improvement, risk sentiment has rebounded and the demand for the franc has fallen.

US Nonfarm Payrolls eyed

The markets are focused on the June US employment report. Nonfarm payrolls are projected to rise to 700 thousand, compared to the May reading of 559 thousand. Still, investors are being cautious, as NFP has underperformed in the past two releases.

Investors will also be keeping a close eye on US wage growth. The estimate for June YoY is a strong gain of 3.7%, compared to the May reading of just 2.0%. With many jobs lying vacant, employers have raised wages in hopes of luring workers to fill jobs. If wages jump sharply, we could see upcoming inflation numbers also rise, which is sure to get the attention of the Federal Reserve.

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USD/CHF Technical

• USD/CHF is putting pressure on resistance at 0.9277. Above, 0.9367 is a monthly resistance line
• On the downside, there is support at 0.9129. This is followed by a monthly support level at 0.9031

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