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Basic Fundamentals

What Market Fundamentals Can Affect The Swiss Franc Futures?

In free market economies, supply and demand is the primary enabler for price movement. Any outside forces that affect supply and demand eventually affect prices. When you are considering a trade in the Swiss franc market some of the basic fundamentals that you should consider are:

1. Interest Rates - Interest rates Interest rates are set by the Swiss National Bank (SNB). The SNB has set a 2.00% inflation target rate. It constantly monitors the M3 index for signs of increasing inflation. The M3 includes liquidity due to currency, time deposits, and all kinds of savings accounts. Significant increases in the M3 index may cause the SNB to adjust the interest rates or other monetary policies.

2. Geopolitical Uncertainty - The Swiss franc has historically been viewed as a safe haven currency. The reasons include: the SNB's independence, strong banking system, and political neutrality. In addition, Switzerland is the fourth largest holder of gold in the world. Since gold is considered a safe haven by many investors the value of the Swiss Franc tends to go up in times of economic or geo-political turmoil.

3. Europe - Since the Swiss economy and the European economy are inextricablke interwined. The Swiss franc is constantly being measured against the Euro currency. The Europen debt crisis has resulting in the Swiss franc rallying to all time highs agains the Euro.

4. Trade Balance - The trade balance indicates whether the country is exporting more than it is importing, a positive trade balance, or importing more than it is exporting which is a negative trade balance. A positive balance will translate to upward pressure on the currency as money flows out of the country, causing greater demand, while a negative balance will have the opposite effect.

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