- The USD/CHF quotes down while the US dollar fights due to growing concerns about the fiscal deficit in the United States.
- The Congress Budget Office expects the “One Big Beautiful Bill” of Trump to increase the deficit by 3.8 billion dollars.
- The CHF of sure shelter receives support from an increase in the feeling of risk aversion due to the growing indebtedness of the US, tariff concerns and geopolitical tensions.
The USD/CHF retires its recent profits recorded in the previous session, quoting around 0.8260 during the European hours of Friday. Meanwhile, the US dollar index (DXY), which tracks the US dollar (USD) compared to a basket of six main currencies, loss around 99.60, near minimum of two weeks. The dollar weakened due to the growing concerns about debt in the United States (USA), while Trump’s “One Big Beautiful Bill” addresses the Senate.
The US House of Representatives approved Trump’s budget for a single vote of 215-214 on Thursday, which would provide tax cuts on tips and loans for car manufactured in the US in the USA. The proposal is expected to increase the deficit at 3.8 billion dollars, according to the Congress Budget Office (CBO).
However, the US dollar received support since stronger data from the purchasing managers index (PMI) of the USA Global of the USA attenuated the probabilities of additional cuts of rates by the Federal Reserve (FED) in the next policy meetings. The PMI composed of S&P global registered a 52.1 for May, going up from April 50.6. Meanwhile, the manufacturing PMI rose to 52.3 from 50.2 previous, while the services PMI rose to 52.3 from 50.8.
The governor of the Fed, Christopher Waller, said Thursday that if the tariffs are about 10%, the economy would be in good shape for the second semester, and the Fed could be in a position to cut rates later in the year. The CME Fedwatch tool suggests that the markets are discounting almost 71% probability that the Fed maintain its stable interest rates during its June and July meetings.
The increase in the feeling of risk aversion due to the growing concerns about the US fiscal deficit, together with tariff concerns, raised the demand for safe refuge for the Swiss Franco (CHF). In addition, geopolitical tensions supported the demand for safe refuge. President Trump told European leaders that Russian President Vladimir Putin is not ready to end the war because he believes he is winning. Trump proposed lower level conversations in the Vatican between Russia and Ukraine, instead of imposing sanctions.
The growing expectations of an additional monetary relief by the Swiss National Bank (SNB) exerted downward pressure on the Swiss Franco, limiting the decrease of the USD/CHF torque. The president of the SNB, Martin Schlegel, recently declared that all the policy tools would be deployed, including a possible return to negative interest rates. However, Schlegel expressed his desire to avoid such measures. The markets now expect a cut of 25 basic points to zero at the next SNB policy meeting on June 19.
Franco Swiss faqs
The Swiss Franco (CHF) is the official currency of Switzerland. It is among the ten most negotiated coins worldwide, reaching volumes that far exceed the size of the Swiss economy. Its value is determined by the general feeling of the market, the country’s economic health or the measures taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franco was linked to the euro (EUR). The link was eliminated abruptly, which resulted in an increase of more than 20% in the value of the Franco, which caused a turbulence in the markets. Although the link is no longer in force, the fate of the Swiss Franco tends to be highly correlated with that of the euro due to the high dependence of the Swiss economy of neighboring Eurozone.
The Swiss Franco (CHF) is considered a safe shelter asset, or a currency that investors tend to buy in times in markets. This is due to the perception of Switzerland in the world: a stable economy, a strong export sector, great reserves of the Central Bank or a long -standing political position towards neutrality in global conflicts make the country’s currency a good option for investors fleeing risks. It is likely that turbulent times strengthen the value of the CHF compared to other currencies that are considered more risky to invest.
The Swiss National Bank (BNS) meets four times a year (once each quarter, less than other important central banks) to decide on monetary policy. The bank aspires to an annual inflation rate of less than 2%. When inflation exceeds the objective or it is expected that it will be overcome in the predictable future, the bank will try to control the growth of prices raising its type of reference. The highest interest rates are usually positive for the Swiss Franco (CHF), since they lead to greater returns, which makes the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the CHF.
Macroeconomic data published in Switzerland are fundamental to evaluate the state of the economy and can affect the assessment of the Swiss Franco (CHF). The Swiss economy is stable in general terms, but any sudden change in economic growth, inflation, current account or foreign exchange reserves have the potential to trigger movements in the CHF. In general, high economic growth, low unemployment and a high level of trust are good for Chf. On the contrary, if the economic data suggests to a weakening of the impulse, the CHF is likely to depreciate.
As a small and open economy, Switzerland depends largely on the health of the neighboring economies of the Eurozone. The European Union as a whole is the main economic partner of Switzerland and a key political ally, so the stability of macroeconomic and monetary policy in the Eurozone is essential for Switzerland and, therefore, for the Swiss Franco (CHF). With such dependence, some models suggest that the correlation between the fate of the euro (EUR) and the Swiss Franco is greater than 90%, or almost perfect.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
