USD/CHF hits two-month high amid resilient US Dollar and dovish SNB outlook
- USD/CHF extends gains for a fifth straight day, reaching its highest level since late August.
- Broad-based US Dollar strength persists as Fed’s hawkish tone tempers December interest rate cut bets.
- SNB’s Tschudin and Schlegel signal patience, saying policy rates are appropriate for now.
The Swiss Franc (CHF) declines further against the US Dollar (USD) on Tuesday, with USD/CHF extending gains for the fifth consecutive day amid broad-based Greenback strength. At the time of writing, the pair is trading around 0.8090, its highest level since August 22.
The US Dollar continues to advance, supported by the Federal Reserve’s (Fed) hawkish tilt following last week’s 25-basis-point (bps) interest rate cut. Fed Chair Jerome Powell reiterated that additional easing this year is “not a foregone conclusion,” prompting markets to scale back expectations for a December rate cut.
Still, diverging opinions among Fed officials have added uncertainty to the monetary policy outlook. Governor Lisa Cook said she sees the current policy rate as “modestly restrictive,” appropriate while inflation remains above the 2% target. San Francisco Fed President Mary Daly said officials should “keep an open mind” about a December move. Chicago Fed President Austan Goolsbee described inflation data as “worrisome,” while Governor Stephen Miran noted that policy has “passively tightened despite Fed cuts.”
The Greenback also draws support from weaker global risk sentiment, as major equity markets slipped on Tuesday. Enthusiasm for AI-related stocks cooled following mixed corporate earnings and fresh warnings from Wall Street executives about a potential market correction driven by stretched valuations.
The US Dollar Index (DXY), which measures the Greenback’s value against a basket of six major currencies, rises above 100.00 to its highest level since early August, up nearly 0.20% on the day.
On the Swiss side, the Franc came under additional pressure after softer-than-expected inflation data released on Monday fueled speculation that the Swiss National Bank (SNB) may consider returning to negative interest rates to counter persistent disinflationary pressures.
However, comments from SNB officials offered little support to the currency. Governing Board member Petra Tschudin said the central bank’s interest rates are “where they should be” and that negative rates would only be used when necessary, adding that FX interventions remain possible and that the inflation forecast is “where we want it.” Meanwhile, SNB President Martin Schlegel remarked that inflation should rise slightly in the coming quarters, though US tariffs are dampening global growth.
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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