USD/CHF

The CPI reading for Switzerland in April was 2.9% YoY, its highest level since September 2008!

This is the largest drawdown from record since financial crisis…

The US Dollar Index (DXY) and USD/CHF have a very strong positive correlation.

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Commodity FX and equity futures were higher overnight, although the moves lacked any real volume so could simply be corrective at this stage.

Since the start of the year, the correlation between Gold and the US Dollar has been negative a majority of the time

Near the end of March, we outlined USD/CHF’s potential to rebound before its next leg lower. With the rebound having since occurred, we’re now watching closely for signs of bearish momentum to return.

If you had checked USD/CHF’s exchange rate at Friday’s close and a mere 30 minutes after Monday’s open, you wouldn’t think anything was amiss…at least if you didn’t have any stop losses within 100 pips!

So, the Federal Reserve successfully helped to inspire a stock market rally that helped to push the major US stock indices to new highs for the year, while the Dollar Index was pushed back to its early January lows.

Safe-haven gold, yen and franc have all been supported by weakness in the stock markets, with the benchmark US indices turning red after a green open.

The greenback has been undermined by growing speculation that, at best, the Federal Reserve will deliver a dovish rate hike, while there is a possibility – a small possibility, but a possibility nonetheless – that it could even hold off hiking altogether.

Although slightly higher today, the perceived safe-haven Swiss franc has been repeatedly hitting new lows on the year against the US dollar, despite the recent stock market sell-off.

As you might expect from the undeniably “risk-off” tone throughout the month of October, the “safe haven” Japanese yen was last month’s best-performing major currency. The big surprise, however, came from a different safe haven currency; the Swiss franc was the weakest major on the month, edging out the euro.

It’s been another rough day for global stock investors (see my colleague Fawad Razaqzada’s note “Global stocks extend decline as Chinese markets resume slide” for more), so it’s not surprising that the safe haven Japanese yen is once again at the top of the FX relative performance charts. What is interesting is the price action in the US dollar, which is the worst-performing major currency on the day.

The big story of yesterday in the FX markets was the big breakout in the dollar following the Federal Reserve’s rate decision the day before.