USD/CHF edges higher above 0.8000 on softer Swiss annual inflation data
- USD/CHF drifts higher to near 0.8010 in Thursday’s early European session
- Trump said he plans to announce his selection to lead the Fed in early 2026.
- The annual CPI inflation in Switzerland came in at 0% in November, softer than expected.
The USD/CHF pair trades in positive territory around 0.8010 during the early European trading hours on Thursday. The Swiss Franc (CHF) weakens against the US Dollar (USD) on softer Swiss inflation data. Traders brace for the US weekly Initial Jobless Claims report, which is due later on Thursday.
Data released by the Swiss Federal Statistical Office on Wednesday showed that the Swiss Consumer Price Index (CPI) inflation eased to 0% YoY in November from 0.1% in the previous month. This figure came in softer than the estimation of 0.1%. The lower-than-expected inflation reading supports the view that the Swiss National Bank (SNB) will maintain an accommodative monetary policy. This, in turn, could lead to a weakening of the Swiss Franc (CHF) against the Greenback.
On the USD’s front, US President Donald Trump said on Tuesday he plans to announce his choice to succeed Jerome Powell as head of the Fed early next year. Reuters reported that White House economic adviser Kevin Hassett has emerged as the frontrunner to be the next Fed chair. Hassett is expected to push for more rate cuts, which could exert some selling pressure on the USD against the CHF. According to the CME FedWatch Tool, there is nearly an 89% chance of a quarter-point rate cut at next week's meeting.
Data released by the Automatic Data Processing (ADP) on Wednesday showed that private employers lost 32,000 jobs in November, compared to a rise of 47,000 (revised from 42,000) recorded in October. This figure came in below the market consensus of 5,000 growth and marked the largest monthly decline since early 2023.
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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