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Market Analysis

USD/CHF Falls Below 0.9150 Amid Weaker US Dollar; Focus Shifts to Swiss GDP Data
Amos Simanungkalit · 2.8K Views

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The European Central Bank (ECB) should primarily use quantitative easing (QE) programs during crises, despite potentially higher associated costs compared to other available tools, as argued by ECB Executive Board member Isabel Schnabel.


In a recent speech in Tokyo, Schnabel emphasized that asset purchases can be potent during financial market turmoil but stressed the need for careful evaluation outside such periods. She highlighted that the effectiveness of QE in boosting aggregate demand varies with economic conditions and cautioned that the costs of QE could outweigh its benefits compared to other policy instruments.


Since 2015, the ECB has deployed substantial asset purchases, particularly during the Covid-19 pandemic, accumulating around €5 trillion ($5.4 trillion) in mainly government debt. Policymakers began scaling back these holdings in 2023 while concurrently increasing interest rates to manage inflation. This reduction will accelerate mid-year as reinvestments from pandemic-era holdings conclude.


Recent ECB policy adjustments include maintaining the current interest rate framework while granting banks more flexibility in managing their required liquidity levels. A new "structural" bond portfolio is under consideration but details are pending finalization.


Looking ahead, the ECB plans a review of its monetary policy strategy next year, which may include reassessing its approach to QE. Schnabel highlighted two key lessons from recent experiences: the need for patience in achieving inflation targets near zero bound scenarios and the benefits of minimizing QE costs by using it selectively and ending it promptly, citing examples like the ECB's commercial paper purchases in 2020 and interventions by the Bank of England during the LDI crisis.


In addition to asset purchases, Schnabel noted the efficacy of measures like targeted longer-term refinancing operations (TLTROs) in supporting the economy during disinflationary shocks, given their more reversible nature in changing conditions.


In financial markets today, the USD/CHF pair weakened to 0.9120 early in the European session, driven by selling pressure on the Greenback amid cautious market sentiment ahead of upcoming GDP data releases from Switzerland and the US.

 

 

OVERVIEW
Today last price 0.912
Today Daily Change -0.0017
Today Daily Change % -0.19
Today daily open 0.9137
 
TRENDS
Daily SMA20 0.9099
Daily SMA50 0.9076
Daily SMA100 0.8903
Daily SMA200 0.8884
 
LEVELS
Previous Daily High 0.9154
Previous Daily Low 0.9132
Previous Weekly High 0.9158
Previous Weekly Low 0.9079
Previous Monthly High 0.9195
Previous Monthly Low 0.8998
Daily Fibonacci 38.2% 0.9141
Daily Fibonacci 61.8% 0.9146
Daily Pivot Point S1 0.9129
Daily Pivot Point S2 0.912
Daily Pivot Point S3 0.9107
Daily Pivot Point R1 0.915
Daily Pivot Point R2 0.9163
Daily Pivot Point R3 0.9171

 

 

Paraphrasing text from "FX Street" all rights reserved by the original author.

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