USD/CHF holds losses near 0.7900 amid dovish tone surrounding Fed outlook
- USD/CHF falls as the US Dollar weakens on more Fed rate cuts in 2026.
- President Trump is expected to announce a nominee for Fed chair later in January.
- The safe-haven Swiss Franc remains supported amid elevated geopolitical tensions.
USD/CHF loses ground as the US Dollar (USD) weakens over expectations of two more Federal Reserve rate cuts in 2026. The pair is trading around 0.7920 during the Asian hours on Friday. The Fed delivered a 25-basis-point (bps) interest rate cut at the December 2025 meeting, bringing the target range to 3.50%–3.75%. The US central bank reduced a cumulative 75 bps of rate cuts in 2025 amid a cooling labor market and still-elevated inflation.
Markets are awaiting US President Donald Trump’s nomination of a new Fed chair to succeed Jerome Powell when his term ends in May, a move that could steer monetary policy toward lower interest rates. President Trump said earlier this week that the announcement would come “sometime in January.” National Economic Council Director Kevin Hassett is viewed as the frontrunner, though Trump has also shown interest in former Fed Governor Kevin Warsh. Other reported contenders include current Fed Governors Christopher Waller and Michelle Bowman, as well as BlackRock’s Rick Rieder.
However, the Federal Open Market Committee’s December Meeting Minutes suggested a divided policy outlook. Most participants felt it would likely be appropriate to pause further rate cuts if inflation continues to ease, while some officials argued for keeping rates unchanged for a period following three cuts in 2025 aimed at supporting a weakening labor market.
The USD/CHF pair edges higher as the safe-haven Swiss Franc (CHF) finds support amid heightened geopolitical tensions, fueled by recent exchanges of accusations between Russia and Ukraine over civilian attacks on New Year’s Day and persistent US–Venezuela friction.
Switzerland’s KOF Economic Indicator rose by 1.7 points to 103.4 in December, reaching its highest level since September 2024 and exceeding market expectations of 101.4. The improvement was most pronounced on the production side, with manufacturing-related indicators pointing to a more favorable outlook.
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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