USD/CHF extends gains amid US-EU trade deal and broad Greenback demand.
- The Swiss Franc weakens broadly as risk sentiment improves and safe-haven demand fades.
- USD/CHF rallies nearly 1% on Monday, marking the strongest daily gain in over a week.
- The Federal Reserve is expected to keep interest rates steady on Wednesday, while the SNB maintains a dovish stance, hinting at negative rates, which widens policy divergence.
The Swiss franc (CHF) loses ground against the US Dollar (USD) on Monday, dropping to its lowest level in over a week as renewed strength in the Greenback swept through currency markets. The move came as investors reacted to the newly signed trade agreement between the United States (US)and the European Union (EU).
The USD/CHF pair extends its advance during Monday’s American trading session. At the time of writing, the pair is trading around 0.8034, up nearly 1.0% on the day. The US Dollar Index (DXY), which tracks the value of the Greenback, is hovering near 98.70, its highest level in nearly two weeks.
On Sunday, US President Donald Trump and European Commission President Ursula von der Leyen met briefly at Trump’s Turnberry golf course in Scotland and announced a framework trade agreement, averting the previously looming threat of a full-scale tariff war. Under the new terms, the U.S. will impose a flat 15% tariff on a broad range of European imports, far less than the previously threatened 30% blanket duty. In return, the European Union has agreed to purchase $750 billion worth of US liquefied natural gas (LNG) over the next three years and to invest approximately $600 billion in key U.S. industries, including clean energy, defense, and advanced manufacturing.
While the deal defused immediate trade tensions, it’s drawn heavy criticism across the EU. Several European leaders and trade officials argue the agreement heavily favors US interests and leaves European exporters at a disadvantage. French Prime Minister François Bayrou described the deal as an act of “submission” and called it a “dark day for Europe,” warning that the EU's long-term sovereignty and economic leverage could be at risk.
Markets reacted immediately. The Euro posted its sharpest one-day drop since May, with the EUR/USD pair falling over 0.50% to around 1.1591. Currency traders dumped euros amid concerns that the deal shifts economic leverage toward the US, thereby undercutting the EU’s export capacity and funneling hundreds of billions of European capital toward US industries.
Market participants are now shifting their focus to the ongoing US-China trade negotiations, which resumed earlier on Monday and are set to continue through Tuesday in Stockholm. Meanwhile, investors remain cautious ahead of the Federal Reserve’s (Fed) monetary policy decision, scheduled for announcement on Wednesday. While markets widely expect the Fed to keep interest rates unchanged at the 4.25%-4.50% range, this is also contributing to the US Dollar’s rebound. In contrast, the Swiss National Bank (SNB) maintains a dovish stance, having cut rates twice this year and recently hinted at the possibility of returning to negative interest rates.
Swiss economy FAQs
Switzerland is the ninth-largest economy measured by nominal Gross Domestic Product (GDP) in the European continent. Measured by GDP per capita – a broad measure of average living standards –, the country ranks among the highest in the world, meaning that it is one the richest countries globally. Switzerland tends to be in the top spots in global rankings about living standards, development indexes, competitiveness or innovation.
Switzerland is an open, free-market economy mainly based on the services sector. The Swiss economy has a strong export sector, and the neighboring European Union (EU) is its main trading partner. Switzerland is a leading exporter of watches and clocks, and hosts leading firms in the food, chemicals and pharmaceutical industries. The country is considered to be an international tax haven, with significantly low corporate and income tax rates compared with its European neighbors.
As a high-income country, the growth rate of the Swiss economy has diminished over the last decades. Still, its political and economic stability, its high education levels, top-tier firms in several industries and its tax-haven status have made it a preferred destination for foreign investment. This has generally benefited the Swiss Franc (CHF), which has historically kept relatively strong against its main currency peers. Generally, a good performance of the Swiss economy – based on high growth, low unemployment and stable prices – tends to appreciate CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
Switzerland isn’t a commodity exporter, so in general commodity prices aren’t a key driver of the Swiss Franc (CHF). However, there is a slight correlation with both Gold and Oil prices. With Gold, CHF’s status as a safe-haven and the fact that the currency used to be backed by the precious metal means that both assets tend to move in the same direction. With Oil, a paper released by the Swiss National Bank (SNB) suggests that the rise in Oil prices could negatively influence CHF valuation, as Switzerland is a net importer of fuel.
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