USD/CHF rebounds amid resilient US labor data and cautious Fed outlook
- The USD/CHF attempts a recovery after falling to its lowest level since July 2011, trading near 0.7970.
- US Jobless Claims fall to 227,000, beating expectations and marking the fourth straight weekly drop.
- The Fed minutes reveal a cautious stance, with most officials favoring interest rate cuts later in the year.
The Swiss Franc (CHF) weakens against the US Dollar (USD) on Thursday, as the Greenback gains ground following stronger-than-expected US weekly jobless claims data, highlighting ongoing strength in the labor market. However, escalating tariff tensions keep broader market sentiment cautious, with upside potential for the US Dollar likely to remain limited in the near term.
The USD/CHF pair is attempting a modest recovery after falling to its lowest level since July 2011 earlier this month amid persistent Franc's strength. At the time of writing, the pair is trading around 0.7970 during the American trading hours, trimming losses from the previous two days as the recent dip attracts some bargain buyers. The bounce aligns with renewed bullish momentum in the Greenback,with the US Dollar Index (DXY) hovering near 97.75.
The latest US Jobless Claims report showed that 227,000 people filed for unemployment benefits last week, well below the 235,000 expected by economists. This marks the fourth straight weekly decline and points to continued strength in the labor market, even as broader economic concerns persist. At the same time, Continuing Claims — a measure of ongoing unemployment — edged up to approximately 1.965 million, the highest level since November 2021 , hinting that while layoffs remain subdued, job seekers are taking longer to find new positions.
The US Dollar is also finding support from diminishing expectations of an immediate rate cut, as recent labor market and inflation data suggest the economy remains resilient. Adding to this sentiment, the minutes from the Federal Reserve’s (Fed) June 17-18 meeting, released on Wednesday, revealed that while most policymakers anticipate rate cuts later this year, some signaled they could consider easing as soon as the July meeting if economic conditions warrant it. However, the Fed maintained a cautious stance, emphasizing that any policy move would depend on incoming data and evolving risks, including trade-related inflation pressures. This has led markets to scale back expectations for a July rate cut, with the CME FedWatch Tool showing traders assigning only a 6.7% probability of an interest rate cut.
In the latest tariff developments, US President Donald Trump has postponed the implementation of new reciprocal duties to August 1, giving affected countries more time to negotiate revised trade terms. Official letters have already been sent to 21 nations so far including Japan, Brazil, and South Korea, warning of steep tariffs ranging from 25% to 50% if fails to reach a deal before the deadline. Looking ahead, markets will be closely watching for additional letters to countries that have not yet been notified, while progress in trade negotiations such as those involving India, China and the European Union could influence sentiment 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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