USD/CHF gathers strength to near 0.7990 on Fed hawkish tone
- USD/CHF edges higher to around 0.7890 in Monday’s early European session.
- A hawkish tone from the Fed supports the US Dollar.
- Iran warned it will completely close the Strait of Hormuz if the US bombs power plants.
The USD/CHF pair gathers strength to near 0.7890 during the early European session on Monday. A hawkish hold from the US Federal Reserve (Fed) provides some support to the US Dollar (USD) against the Swiss Franc (CHF). Traders will closely monitor the situation in the Middle East.
The Fed voted 11-1 to keep interest rates unchanged in the target range of 3.50% to 3.75% at its March meeting last week. This marks the second consecutive meeting where the US central bank has held rates steady following a series of cuts in late 2025.
Soaring crude oil and energy prices, driven by the escalating US-Israeli war with Iran, reignite inflation fears and prompt traders to dial back Fed rate cut expectations. Futures traders have priced in a nearly 85% chance of no rate cuts in the April Fed policy meeting, according to the CME FedWatch tool.
On the other hand, heightened conflict in the Middle East could boost a safe-haven currency such as the CHF. The Iranian military stated that it will completely shut the Strait of Hormuz if US President Donald Trump proceeds with his threats to target Iranian energy facilities. This statement came as Trump on Sunday warned he would “obliterate” Iranian power plants if the Strait of Hormuz were not opened within 48 hours.
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action 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 Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every 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 is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally 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 CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
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