USD/CHF holds losses near 0.7750 ahead of Swiss GDP data
- USD/CHF falls as the Swiss Franc strengthens on safe-haven demand.
- Tensions rise after Iran barred uranium exports, as Trump warned of military action.
- Traders await Germany’s labor and CPI figures later in the session.
USD/CHF edges lower after registering little gains in the previous session, trading around 0.7730 during the Asian hours on Friday. The pair declines as the Swiss Franc (CHF) gains on safe-haven demand amid renewed trade and geopolitical tensions. Investors await Switzerland’s Swiss Gross Domestic Product (GDP) data later in the session.
Tensions remain elevated after Iran said it would not allow enriched uranium to leave the country. A sizeable US military presence in the Middle East has kept markets cautious, with President Donald Trump warning of possible military action if no agreement is reached.
Iranian Foreign Minister Abbas Araqchi described Thursday’s talks as the most substantive so far, outlining Tehran’s demands for sanctions relief and a framework for lifting restrictions. However, a source familiar with the US position said American officials were dissatisfied. Negotiations will resume after consultations in both capitals, with technical-level meetings scheduled in Vienna next week.
The USD/CHF pair also weakens as the US Dollar struggles amid persistent uncertainty over US trade policy. Traders now look to the January PPI release for guidance on Federal Reserve policy.
Trump announced plans to impose a blanket 15% tariff on imports after a Supreme Court ruling struck down his earlier reciprocal tariff regime. Meanwhile, US Trade Representative Jamieson Greer said tariffs could be raised to 15% or higher for several countries in the coming days.
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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