What is CAD/CHF?
The CAD/CHF currency pair represents the exchange rate between the Canadian dollar (CAD) and the Swiss franc (CHF) in the forex market, or how many CHF it takes to buy one CAD. Even though both currencies are major ones, the currency pair is classified as a minor one because it does not include the US dollar. CAD/CHF often has lesser liquidity because it is not as actively traded as other significant currency pairs like EUR/USD or USD/JPY. Nevertheless, it offers opportunities for investors looking to diversify their holdings.
What affects the price of the CAD/CHF pair?
Commodity prices, particularly oil, have a great impact on the CAD/CHF pair. Canada is a major exporter of resources and raw materials like crude oil, natural gas, gold, and wood, to the extent that CAD is frequently referred to as a commodity currency. Switzerland, on the other hand, is a major physical gold trade hub and is home to five of the most important precious metal refineries in the world, where 70% of the world's supply is melted down and refined. Consequently, changes in gold prices affect the value of the CHF. When they rise, there can be an increase in demand for the CHF and its value in relation to the CAD.
The monetary policies of the Swiss National Bank (SNB) and the Bank of Canada (BoC) have a significant effect on the CAD/CHF exchange rate. Interest rate differences between the two nations may entice investors from abroad, resulting in capital flows and affecting the currency pair.
General market sentiment can also influence the CAD/CHF pair. The Swiss franc is regarded as a safe-haven asset due to its low rate of inflation and stable economy. This quality makes it especially appealing during times of financial or economic unpredictability, allowing the CHF's value to increase in relation to the CAD.
What to watch out for when trading CAD/CHF?
CAD/CHF traders should keep an eye out for economic indicators such as GDP growth, employment data, inflation, and the trade balances of both Canada and Switzerland. Monitor announcements from the key influential bodies in the two countries. These include:
- Bank of Canada (BoC) and Swiss National Bank (SNB) for interest rate and policy decisions
- Statistics Canada and the Swiss Federal Statistics Office (FSO) for data on Trade Balance, Unemployment Rate, Consumer Price Index (CPI), and Gross Domestic Product (GDP)
- Oil-related events (such as OPEC meetings or inventory data)
- Geopolitical tensions, wars, and other conflicts