USD/CHF rises above 0.8250 as traders expect Fed to leave rates unchanged
- USD/CHF is gaining ground as investors adopt a cautious stance ahead of the Federal Reserve's interest rate decision.
- All eyes are on Fed Chair Jerome Powell’s comments, particularly against the backdrop of rising tariff tensions.
- The Swiss Franc could come under pressure, with markets fully pricing in a SNB’s 25 basis-point rate cut in June.
USD/CHF halts its three-day losing streak, hovering around 0.8250 during Wednesday’s European session as the US Dollar (USD) gains traction. The Greenback is strengthening as markets adopt a cautious tone ahead of the Federal Reserve's interest rate announcement, scheduled for later in the North American session.
The Fed is widely anticipated to leave its benchmark rate unchanged at 4.25–4.50% for a third straight meeting in May 2025, balancing signs of easing inflation with a resilient labor market and increasing uncertainty around US trade policy. Market participants are closely watching Fed Chair Jerome Powell’s remarks, especially amid escalating tariff tensions and renewed political pressure from President Trump urging rate cuts.
In a related development, US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are set to meet Chinese Vice Premier He Lifeng in Geneva this weekend. This marks the first top-level engagement since the US ramped up tariffs, fueling global trade friction. China’s Ministry of Commerce confirmed attendance after reviewing Washington’s proposals, considering domestic industry feedback and broader global sentiment.
Despite a firmer USD, the Swiss Franc (CHF) has also found support, bolstered by safe-haven flows as investors react to volatile US trade and fiscal policy signals. Nonetheless, the CHF may face headwinds as markets are fully pricing in a 25 basis-point rate cut by the Swiss National Bank (SNB) at its June meeting, which would lower the policy rate from 0.25% to 0%. Some analysts even suggest a return to negative interest rates is possible.
On the data front, the SNB’s foreign exchange reserves declined for the third month in a row, falling to CHF 702.895 billion in April 2025—the lowest level since August 2024—from CHF 725.551 billion in March. Meanwhile, the Swiss unemployment rate dipped to a non-seasonally adjusted 2.8% in April, the lowest in four months, down from 2.9% in the two preceding months.
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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