- The USD/CHF rises to 0.9115 in the early European session on Tuesday.
- The threats of reciprocal tariffs and additional protectionist measures by Trump drive the US dollar.
- Geopolitical tensions in the Middle East could boost shelter like ChF.
The USD/CHF pair quotes in positive territory for the fourth consecutive day around 0.9115 on Tuesday during the first hours of European negotiation. The threats of reciprocal tariffs and the imposition of 25% tariffs on aluminum and steel by US President Donald Trump provide some support to the US dollar (USD). Investors will closely follow the semiannual testimony of the president of the Federal Reserve (FED), Jerome Powell, Tuesday.
Analysts believe that Trump administration tariff policies could be inflationary and exert more pressure on the Fed to maintain high interest rates. The markets are valuing 36 basic points (PB) of cuts this year, compared to 42 bp after an optimistic report of the labor market on Friday. This, in turn, supports the dollar against the Swiss Franco (CHF).
“It would not be wise United Overseas Bank (UOB).
On the other hand, global uncertainties and geopolitical tensions in the Middle East could boost ChF as a refuge. The Kremlin said Monday that the relations between the US and Russia were on the verge of collapse and refused to confirm whether Russian President Vladimir Putin had spoken with President Donald Trump, although Trump said it on Sunday.
The Swiss Franco could quote stronger in the coming months, since the Swiss National Bank (SNB) is unlikely to return to negative interest rates, said Commerzbank analyst Michael Pfister, in a note. The SNB could finish its rate cuts cycle with a 0.0% policy rate, compared to the current 0.5%.
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 Although the link is no longer in force, the fate of the Swiss Franco tends to be highly correlated with that of the euro due to the high dependence of the Swiss economy of neighboring Eurozone.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.
