USD/CHF holds gains near 0.7950, further upside seems limited
- USD/CHF may lose ground as the Swiss Franc receives support from diminishing odds of further SNB rate cuts.
- The SNB is widely anticipated to hold the policy rate steady at 0% in September following latest hot CPI figures.
- The recent FOMC Meeting Minutes indicated uncertainty surrounding the Fed’s policy stance.
USD/CHF gains ground after two days of losses, trading around 0.7950 during the European hours on Thursday. The upside for the pair could be limited as the Swiss Franc (CHF) receives support from fading expectations of further rate cuts by the Swiss National Bank (SNB), following a stronger-than-expected inflation reading.
Earlier this month, the Federal Statistical Office of Switzerland reported that the Consumer Price Index (CPI) rose 0.1% year-on-year in June, reversing a 0.1% decline and surprising forecasts that anticipated another drop. This rebound brings inflation back within the SNB’s 0–2% target range, signaling renewed price stability. As a result, the Swiss central bank is widely expected to hold the policy rate steady at 0% in September, with many analysts projecting it will remain unchanged through 2026.
Additionally, the USD/CHF pair may lose its ground as the Swiss Franc (CHF) receives support from increased safe-haven demand, driven by the potential impact of US President Donald Trump's tariffs on global economic growth.
President Trump unveiled on Wednesday a new round of tariff demand letters, including a 50% rate on Brazil, a 30% rate on Algeria, Libya, Iraq, and Sri Lanka, and a 20% rate on goods from the Philippines, which are set to hit in August, per Bloomberg.
Additionally, the US Dollar (USD) struggles due to rising trade concerns and uncertainty surrounding the Federal Reserve’s (Fed) policy outlook. The latest Federal Open Market Committee (FOMC) Minutes from the June 17–18 meeting, released on Wednesday, indicated ample uncertainty and a divide within the Fed policymakers on how tariffs will impact inflation going forward.
The US Dollar Index (DXY), which measures the value of the Greenback against six major currencies, extends its losses for the second successive session and is trading at around 97.30 at the time of writing. Traders will likely observe the US weekly Initial Jobless Claims later on Thursday.
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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