USD/CHF range-bound amid US trade uncertainty and soft swiss data
- USD/CHF lacks clear direction on Monday as fresh US trade tensions weigh on the Dollar.
- Swiss PPI data underscores subdued inflation pressure.
- Investors turn to upcoming US labor and inflation data for fresh catalysts.
USD/CHF struggles for direction on Monday as weaker-than-expected Swiss economic data undermines the Swiss Franc (CHF), while a softer US Dollar (USD) limits upside momentum. At the time of writing, the pair is trading around 0.7738, down 0.16% on the day.
The Greenback came under renewed pressure after US President Donald Trump announced a 15% global tariff, responding to a recent US Supreme Court ruling that found his use of the International Emergency Economic Powers Act (IEEPA) to impose sweeping tariffs unlawful.
The move reignited concerns over US policy stability and fiscal credibility, weighing on US assets as Trump’s aggressive trade agenda remains a persistent drag on investor sentiment.
Market participants are now closely monitoring trade-related developments for fresh direction. The European Parliament has reportedly paused the ratification process of the US-EU trade deal, while India has postponed negotiations aimed at finalizing an interim trade agreement with Washington.
However, the US Dollar is holding relatively steady as investors await clearer signals on US trade policy. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is trading around 97.67 after touching an intraday low near 97.35.
On the data front, the US economic calendar remained relatively light. Factory Orders declined 0.7% MoM in December, missing expectations for a 1.1% increase and marking a sharp slowdown from the previous 2.7% rise.
Investors also digested remarks from Federal Reserve (Fed) Governor Christopher Waller, who dissented in favor of a 25 basis point rate cut at the January meeting, citing concerns about the labor market. Waller said that “all data for the past year indicates labor demand is falling more than labor supply” and warned that a “weak labor market is likely to continue going forward."
In Switzerland, data released by the Federal Statistical Office showed Producer and Import Prices fell 0.2% MoM in January, compared with expectations for a 0.1% increase and matching the previous month’s decline. On an annual basis, Producer and Import Prices dropped 2.2% in January, following a 1.8% decrease in December.
Looking ahead, the US economic calendar is relatively light this week and is unlikely to materially shift expectations around the Fed's monetary policy path. Attention will center on the four-week average of ADP Employment Change and the Conference Board’s Consumer Confidence report on Tuesday.
Markets will also track President Donald Trump’s State of the Union address on Wednesday, followed by weekly Initial Jobless Claims on Thursday and the January Producer Price Index (PPI) due on Friday.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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