- USD/CHF struggles to regain a near five-month high of 0.8960 amid weakness in the Swiss Franc (CHF).
- The SNB unexpectedly cuts its interest rates by 50 bps to 0.5% on Thursday.
- Investors expect the Fed to cut its key interest rates by 25 bps on Wednesday.
The USD/CHF pair aims to revisit a five-month high of 0.8960 in the North American session on Friday. The Swiss Franc pair rises as the outlook for the Swiss currency has weakened across the board after the Swiss National Bank (SNB) surprisingly cut its key interest rates by 50 basis points (bps) to 0.5 % on Thursday.
Market participants anticipated that the SNB would cut interest rates by 25 bps, as the central bank remained concerned about risks of inflation missing the bank’s target and growing concerns about global markets due to possible tariffs. of the president-elect of the United States (USA), Donald Trump.
Following a larger-than-usual rate cut decision, SNB Chairman Martin Schlegel commented: “With our easing of monetary policy today we are counteracting lower inflationary pressure.” On the outlook for interest rates, Schlegel said: “We will continue to monitor the situation closely and will adjust our monetary policy if necessary to ensure that inflation remains within the range consistent with price stability over the medium term.”
Meanwhile, the US Dollar (USD) gives up its intraday gains and turns negative as the Federal Reserve (Fed) is widely anticipated to cut its key interest rates by 25 bps to 4.25%-4.50% at Wednesday’s monetary policy meeting. The US Dollar Index (DXY), which tracks the value of the USD against six major currencies, falls near 106.75 after facing selling pressure above 107.00.
Although the Fed is expected to cut interest rates next week, it is expected to pause the policy easing cycle in January as progress on disinflation appears to have stalled. According to the CME’s FedWatch tool, there is a 77% chance that the Fed will leave interest rates unchanged next month.
Swiss Franc FAQs
The Swiss Franc (CHF) is the official currency of Switzerland. It is among the ten most traded currencies globally, reaching volumes that far exceed the size of the Swiss economy. Its value is determined by general market sentiment, the economic health of the country or measures taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the value of the franc, causing turbulence in the markets. Although the peg is no longer in force, the fortunes of the Swiss franc tend to be highly correlated with that of the euro due to the Swiss economy’s high dependence on the neighboring eurozone.
The Swiss Franc (CHF) is considered a safe haven asset, or a currency that investors tend to buy during times of market stress. This is due to the perception of Switzerland in the world: a stable economy, a strong export sector, large central bank reserves or a long-standing political stance towards neutrality in global conflicts make the country’s currency a good option for investors who shy away from risks. Turbulent times are likely to strengthen the value of CHF against other currencies that are considered riskier to invest in.
The Swiss National Bank (SNB) meets four times a year (once a quarter, less than other major central banks) to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation exceeds the target or is expected to exceed it in the foreseeable future, the bank will attempt to control price growth by raising its reference rate. Higher interest rates are usually positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the CHF.
Macroeconomic data published in Switzerland is essential to assess the state of the economy and can affect the valuation of the Swiss Franc (CHF). The Swiss economy is broadly stable, but any sudden changes in economic growth, inflation, current account or central bank foreign exchange reserves have the potential to trigger moves in the CHF. In general, high economic growth, low unemployment and high confidence are good for the CHF. Conversely, if economic data points to weakening momentum, the CHF is likely to depreciate.
As a small, open economy, Switzerland relies heavily on the health of neighboring Eurozone economies. The European Union as a whole is Switzerland’s main economic partner 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 Franc (CHF). With such dependence, some models suggest that the correlation between the fortunes of the Euro (EUR) and the Swiss Franc 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.