The foreign exchange (forex) market is one of the most actively traded and liquid markets in the world, with over $6.6 trillion worth of trades taking place each day. Currencies are traded in pairs. The trader will buy in the base currency, and sell in the quote currency – the currency against which the base currency is quoted.
To learn more about what is forex trading, it’s important to thoroughly research the forex market, as well as stay informed about the different factors which could have an impact on a country’s economy.
An example of this is the Swiss Franc (CHF), the national and only official currency of Switzerland. The Swiss Franc, which is also widely recognised as Fr, has become an extremely strong currency, increasing in value over both the Euro (EUR) and the US Dollar (USD) since the 2000s. This can be mainly attributed to the European debt crisis and monetary policy in the US.
In this article, we’ll take a look at how the CHF performed in December 2021, in comparison to January 2022, and the factors which could’ve impacted this.
December
In December, the Swiss Franc was equal to 1.09 US Dollars. Traders tend to purchase the Swiss Franc in times of economic uncertainty, as it’s often seen as a safe haven. Following the recent COVID-19 pandemic, which has swept the globe, it’s no wonder that investors guide turned to a currency that remains stronger than their own — despite Switzerland, themselves, seeing the fifth wave of the pandemic, with the spread of the Omicron variant.
In addition to this, Switzerland has one of the highest levels of Gross Domestic Product (GDP) per capita in the world, with its strong economic performance largely driven by the services sector. A country’s GDP is just one of the indicators used to calculate and determine the strength of the nation’s economy.
However, the threat of inflation, which is currently higher than expected in both the US and Europe, is cause for concern regarding the value of the Swiss Franc. Because of this, as with the emergence of the new COVID variant, the health of many economies across the globe lay in the balance.
January
In the first half of January, the Swiss Franc took a fall to 1.08 US Dollar, but shortly peaked again at 1.10, before settling back to 1.09. Despite being such a strong currency, Switzerland’s economy could potentially be affected by a variety of things in the coming year. This might include supply chain struggles due to staff shortages caused by the Omicron variant, as well as the pharmaceutical, banking, and other fastest-growing industries facing stiff competition.
Last year alone, the country saw a solid 3.5% in rebound growth, and expect to see yet another higher-than-average business growth in 2022. In fact, the State Secretariat for Economic Affairs (SECO) has predicted another 3% GDP growth, whilst still taking into consideration the factors contributing to the slight slowdown, such as COVID-19.
The labour market has made a full recovery since the pandemic, but businesses are finding it hard to find skilled workers in particular specialist areas, which could lead to shortages, should the spaces continue to be unfilled.
Despite all this, the Swiss bank is keeping a close eye on interest rates. As many industries continue to recover after recent turbulent times, and CHF remains strong in regards to some of the most popular traded currencies – the US Dollar and Euro, for example – the Swiss Franc appears to be a safe haven for many investors.
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