USD/CHF slips below 0.8000 as US-EU tensions revive demand for the Swiss Franc
- USD/CHF slides as geopolitical risks lift demand for the Swiss Franc.
- Trump’s tariff threat fuels trade war fears and weighs on the US Dollar.
- Traders eye US PCE inflation, GDP data, and Swiss Producer and Import Prices.
The Swiss Franc (CHF) attracts fresh buyers against the US Dollar (USD) on Monday as escalating tensions between the United States (US) and the European Union (EU) over control of Greenland support demand for the safe-haven Franc. At the time of writing, USD/CHF trades around 0.7975, down nearly 0.70% on the day.
Over the weekend, US President Donald Trump posted on Truth Social that a 10% tariff would be imposed from February 1 on eight European nations, including Denmark, Germany, France, the UK, Sweden, Norway, the Netherlands and Finland, adding that it would rise to 25% in June unless and until “a deal is reached for the complete and total purchase of Greenland.”
The announcement has reignited fears of a broader trade conflict and drawn sharp criticism from European leaders, who have warned of possible retaliatory measures. Trump has repeatedly argued that Greenland is strategically vital to the US and its national security, claiming that China and Russia want influence over the territory and saying there is “not a thing” Denmark can do about it.
Against this backdrop, investor confidence in the Greenback as a haven has taken a hit, as Trump’s repeated use of tariffs as a policy weapon continues to fuel uncertainty around the US economy.
The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is trading around 99.11, down over 0.20%.
Looking ahead this week, US markets are closed on Monday for Martin Luther King Jr. Day. The spotlight then shifts to Thursday’s delayed Personal Consumption Expenditures (PCE) inflation reports and the annualized third-quarter Gross Domestic Product (GDP) release. On Friday, attention turns to the preliminary S&P Global PMI surveys and the University of Michigan consumer sentiment data.
In Switzerland, traders await Producer and Import Prices on Tuesday for fresh insight into domestic inflation pressure.
Markets will also look to the World Economic Forum in Davos, where Swiss National Bank (SNB) Chairman Martin Schlegel is due to speak on Tuesday. US President Donald Trump is expected to address the forum, keeping trade and geopolitical risks in focus. Any fresh headlines on tariffs, Greenland, or US-EU relations are likely to support safe-haven flows into the CHF.
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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