- The USD/CHF faces downward pressure as the Swiss Franco gains strength in a growing demand for safe refuge.
- The Swiss Franco is receiving support from the decreasing expectations of greater relief of policies by the Swiss National Bank.
- President Trump imposed a 30% tariff on imports from the European Union and Mexico.
The USD/CHF remains moderate per second consecutive session, quoting around 0.7970 during the Asian hours of Monday. The pair had difficulties since the Swiss Franco (CHF) receives support from a greater demand for safe refuge amid the current global commercial uncertainties, driven by uncertain tariff concerns. Swiss producers and imports prices will be observed for June later in the day.
In addition, the CHF receives support from the fluctuating expectations of a greater relief of policies of the Swiss National Bank (SNB) amid a renewed risk of inflation. SNB officials are expected to maintain the stable interest rate at 0% in September, with many analysts predicting that it will probably be maintained at that level until 2026.
Additionally, the USD/CHF torque faces challenges as the US dollar (USD) goes back in the middle of the climb of global commercial tensions. The president of the USA Donald Trump announced, on Saturday, a 30% tariff to imports from the European Union (EU) and Mexico as of August 1. Trump also proposed a general tariff rate of 15%-20%to other commercial partners, an increase with respect to the current base rate of 10%.
However, the European Union announced on Sunday that it will extend its pause in retaliation measures against US tariffs until the beginning of August, hoping to reach a negotiated agreement. The reports also indicated that the EU has initiated discussions with other countries affected by tariffs, including Canada and Japan, to explore coordinated responses.
However, the USD/CHF torque could be seen as the US dollar could recover land amid a renewed caution of the market around the Federal Reserve Policy Perspective (FED). Chicago Fed President Austen Goolsbee declared that the ongoing commercial policy, under the constant Trump tariff threats, could hinder the ability of the Fed to make rates cuts that both the market in general and Trump himself want to see.
Swiss Franco – Frequently Questions
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.
