Forex trading 101 pdf


Guidelines for Trading the Swiss Franc. Despite its diminutive size, Switzerland has always been very important within the international financial community and the Swiss Franc, its currency, also has key significance. It is the sixth most traded currency on the Forex market, despite the fact that the country’s economy in terms of nominal GDP is only 19th in the global ranking. The Swiss Franc is not commonly held as a reserve currency, even though the nation has a reputation for financial prudence and conservatism. The Swiss National Bank (SNB) is responsible for the management of the Swiss Franc, and it targets a consistent rate of inflation of about 2% while generally refraining from engaging in any stimulative monetary policies in response to any economic downturn. The Swiss Economy and the Franc. While the economy of Switzerland is relatively small, it does have considerable significance in the global financial community. Over 11% of Switzerland’s GDP is made up of financial services, and the nation’s very strict policies around banking secrecy and neutrality make the country a popular destination for the storage of global funds. Although in recent times some of the secrecy around Switzerland’s banking has been removed, it is possible that Swiss banks are home to as much as a third of global offshore funds. As Switzerland is a neutral country with a long-standing reputation as a centre for banking, the Bank for International Settlement has its home in Basel. Although the SNB continues to target pricing stability, stability in terms of growth has not been achieved, with Switzerland’s GDP growth dropping to negative points on at least four occasions over the last two decades. Inflation has, however, been relatively well controlled in the last 20 years, with debt holding steady at around 55% for some time. Swiss unemployment is very low, despite the fact that the country’s manufacturing industry is in decline, but its chemical, pharmaceutical and electric machinery industries are still competitive. The major component of the Swiss economy is the service industry, and the financial services industry in particular, and this contributes strongly to the high per-capita income that is enjoyed by many Swiss citizens. RECOMMENDED FOREX BROKERS. RECOMMENDED FOREX BROKERS. Factors That Drive the Swiss Franc. There are numerous factors that drive the exchange rate of the Swiss Franc, including the following: Economic data releases – These include GDP data, information about industrial production and retail sales, trade balances and inflation rates. Other important information deserving of attention includes employment figures, scheduled SNB meetings, and any daily news pertaining to natural disasters, political climate, or any new government policy. All of these factors affect the exchange rate of the Swiss Franc. Swiss banking services – One major factor contributing to the value of the Swiss Franc is the worldwide demand for Switzerland’s banking services as a secure and confidential place to hold offshore funds. The Swiss Franc is also a stable alternative to the United States Dollar or the Pound Sterling in times of uncertainty and turbulence. Whenever other economies show signs of deterioration, the Swiss Franc increases in popularity with speculators and traders. The Swiss Franc and Carry Trading. Carry trading is a trading strategy that is popular with many investors. Although one of the most common currencies for this style of trading is the Japanese Yen, the Swiss Franc is also popular with carry traders thanks to its low rates, liquidity and stability. Usually, carry trades that involve the Swiss Franc pair it with the Pound Sterling or the Euro, so investors wishing to participate in Forex trading with this currency must pay close attention to interest rates in the Eurozone and in the UK to determine the demand for the Swiss Franc. Factors That are Unique to the Swiss Franc. Switzerland is famous for its neutrality as a nation, and this factor is exceptionally important in terms of the Swiss Franc currency and the country’s economy as a whole. Switzerland is independent from the Eurozone countries, although it does harmonise several of its policies with EU countries. Switzerland has less sensitivity to its neighbours’ economic performance due to its being a destination country of choice for the storage of offshore funds. Switzerland’s reliance on its financial sector does pose some risks, as some of the laws around the country’s banking secrecy have now been relaxed under pressure from other countries, including Germany and the USA. This may deter some people who would prefer to keep their money secret and safe from utilising these services, especially as some other nations such as Singapore have responded to this by tightening up their banking rules in order to promote themselves as a viable alternative for the holding of offshore accounts. The Swiss Franc is also only controlled by decisions over interest rates made by the SNB rather than by economic conditions within the country. This is primarily because the Swiss Franc is more dependent on its utility as a stable, reliable and liquid alternative currency to other major currencies such as the US Dollar. Other Major Forex Currencies. Exclusive Offers Latest Broker Reviews Academy Tips and Tricks. Get the latest Forex updates now! Receive the latest Forex broker reviews and offers Learn more about trading Forex through our academy section Start trading with a demo account and teach yourself to be a trader No thanks, maybe later. Risk Warning - Your capital is at risk. Trade with caution, these products might not be suitable for everyone so make sure you understand the risks involved! Market News. The Swiss National Bank on Thursday decided to maintain the minimum exchange rate of the Swiss franc at 1.20 per euro and also retained the key interest rate close to zero. The central bank said that the franc is still overvalued, with the appreciation of the franc last summer exerting stronger downward pressure on price levels than anticipated. In the monetary policy statement published today, the central bank said that it will continue to enforce the minimum exchange rate of CHF 1.20 per euro. The target range for the three-month Libor will remain unchanged at 0.00-0.25 percent. The decision was in line with economists' expectations. The bank said it is prepared to buy foreign currency in unlimited quantities and will maintain liquidity in the money market at an exceptionally high level. The central bank also noted that even at the current rate, the value of Swiss franc is still high. However, the exchange rate floor is having an impact as it reduced exchange rate volatility and gives business leaders a better basis for planning. The bank said indications are that Switzerland's economy is stabilizing. For 2012, the SNB is forecasting moderate growth close to 1 percent, stronger than the 0.5 percent growth previously estimated. Based on SNB's conditional forecast, which is based on the assumption of a three-month Libor of 0.0 percent, the consumer price index may fall 0.6 percent in 2012, faster than the 0.3 percent decline projected in December. "Last summer's appreciation of the Swiss franc had a stronger dampening effect on prices than anticipated," SNB said, adding, in the longer term, inflation will be lowered by the worsening growth outlook for the euro area and the continuing high valuation of the Swiss franc. For 2013, the central bank is expecting inflation of 0.3 percent, down from the 0.4 percent projected in December. For 2014, it predicts an inflation rate of 0.6 percent. "In the foreseeable future, there is no risk of inflation in Switzerland," the bank said. "If developments in the international economy are worse than foreseen, or if the Swiss franc does not weaken further, as expected, downside risks for price stability could re-emerge," the bank said. SNB reiterated that it is ready to take further measures at any time if the economic outlook and the risk of deflation so require. It also noted growing signs of imbalances in the Swiss mortgage and real estate market for residential property and warned that if these imbalances increase further, this could lead to considerable risks to financial stability. The Swiss economy expanded 0.1 percent quarter-on-quarter during the fourth quarter, bolstered by strong private consumption and foreign trade. The State Secretariat for Economic Affairs,or SECO, upwardly revised its forecast for the gross domestic product this year to 0.8 percent from the 0.5 percent projected in December. Meanwhile, the growth prediction for 2013 was cut marginally to 1.8 percent from 1.9 percent. EURCHF. Live and Historical EUR/CHF Rates. The following chart represents the value of the Euro against the Swiss Franc (CHF) – how many franks can purchase one Euro. Since the Euro came into circulation, the Swiss frank mostly followed the movement of the Euro because of Switzerland’s close geographic and economic ties with the Eurozone. Both are major currencies, but EUR/CHF is not a major pair. The Euro. The Euro made its debut in 1999, and 327 million people in 21 countries use the Euro as their currency. The Euro is the currency of the world’s largest economy: the Eurozone. However, the dollar still has a larger reserve currency and is traded more than the Euro. The European Central Bank (ECB) in Frankfurt, controls the Euro, but with a comparatively less controlling approach than the American Fed, for instance. The currencies of 23 countries, over 50% of which are in Africa, are pegged to the Euro. The Euro is strongly impacted by finance, services, and manufacturing. The Swiss Franc. Switzerland is one of the most wealthy and stable economies in the world. The Swiss National Bank issues the Swiss frank as the currency of Switzerland and Liechtenstein. It is the last franc currency issued by a European country. Until 1850, various foreign currencies circulated in Switzerland. In 1945, the Swiss franc was pegged to the US dollar, and until 2000, 40% of the frank’s value was backed by gold. The Swiss franc has followed the movement of the Euro as it competes with the US dollar. The Swiss franc is a very stable currency but accounts for only one percent of foreign exchange reserves. The Swiss economy depends largely on banking (especially with foreign investors), industry, and trade. EURCHF Analysis. Although Switzerland rejected the Euro as their currency, the Swiss government has worked closely in bilateral agreements with the EU. Significant EU investment in Swiss banks also contributes to the Swiss Frank following the ups and downs of the Euro. Both economies depend primarily on manufacturing and service. The close economic ties, similar economies, and stability of the Eurozone and Switzerland makes the EUR/CHF pair an unlikely candidate for carry trades.