The Canadian dollar and Swiss franc (CAD/CHF) is a currency pair that is not one of the main instruments but still retains little liquidity.
Switzerland’s economy is relatively small: in 2017, it will amount to only 679 billion dollars, which is only a quarter of Canadian 1.65 trillion dollars for the same period. Direct trade between countries is limited.
Switzerland’s economy depends mainly on the export of luxury goods, financial services, and tourism, while Canada’s main economic activity is the export of raw materials and goods.
What affects the two countries greatly them. Switzerland has a reputation as a reliable and solid financial base (as one would expect from a country that owns a third of the world’s private capital in its banks), which makes it the main financial repository in the world.
The Canadian dollar is seen more as a commodity currency with higher interest rates and fluctuations – although, given the way Canada experienced the last serious recession with minor negative consequences, this assumption may change.
Monetary policy about the Canadian dollar is established by the Bank of Canada (BOC), which is trying to keep inflation at 2%, the middle point within the window between 1% and 3%.
The monetary policy of Switzerland is determined by the Swiss National Bank (SNB), which takes its work to maintain currency stability very seriously.
Although not authorized to do so, the SNB will also intervene to maintain exchange rates within target levels to support the export and financial sectors of the economy.
These interventions may strengthen or weaken the currency, but for many years the bank considered the currency to be too strong and regularly intervened to weaken it.
The BOC meets every six weeks to determine its monetary policy, while the Swiss National Bank does this only four times a year.
CAD/CHF is generally regarded as an instrument for the transfer of goods, with interest rates in Canada generally higher than in Switzerland. This helps to provide the pair with greater liquidity without much volatility, with a bias towards technical data.
Most of the driving forces in currency pair fluctuations are often associated with economic problems that affect the Canadian side, such as changes in commodity prices (since Canada’s main export is oil to the United States, this has the greatest impact on the currency).
Economic uncertainty is not only lowering commodity prices but also increasing interest in safe havens such as francs. The main trading partner of Canada is the United States. This means that what is happening in the largest economy in the world can also flow into this currency pair.
One of the unique features of the Swiss franc that makes it so attractive as a haven is that about 25% of the currency is backed by gold, but it also means that the price of this precious metal can affect the currency.
In general, the pair demonstrates stability for the year but jumps in the economy can greatly affect the stability of the exchange rate, they usually occur 1-2 times in 3-4 months when oil demand rises or falls. Against the background of other economic indicators, this is the most important one for traders.
In the short term, you can make good money on a CAD/CHF pair when financial statements of Canadian companies, as well as employment results, are published.
With a falling trend, the Canadian dollar will begin to weaken, which will last from several days to several weeks. But in the end, the situation will equalize, and the pair will return to the original exchange rate.