USD/CHF softens to below 0.8000 as tariff uncertainty continues
- USD/CHF edges lower to around 0.7980 in Tuesday’s Asian session.
- Investors await progress in trade talks ahead of an August 1 deadline.
- Bessent called for deeper bank regulatory reforms.
The USD/CHF pair trades with mild losses near 0.7980 during the Asian trading hours on Tuesday, pressured by a weaker US Dollar (USD) and lower Treasury yields. Investors remain cautious ahead of the US deadline of August 1 for countries to strike trade deals with the US or face more tariffs.
US President Donald Trump delayed the so-called "reciprocal tariffs" in April, promising to reach around 90 trade agreements in 90 days. The White House said that country-specific tariffs will take effect on August 1 unless targeted nations reach a trade deal with the US beforehand. Tariff uncertainty is likely to boost the safe-haven demand, benefiting the Swiss Franc (CHF) in the near term.
A White House official said that US President Donald Trump is likely to fire Fed Chairman Jerome Powell soon. However, Trump denied it in a Truth Social post on Sunday, calling it “typically untruthful. Concerns over the US Federal Reserve (Fed) independence might contribute to the USD’s downside.
US Treasury Secretary Scott Bessent said the central bank’s independence on monetary policy is under threat by its "mandate creep" into non-policy areas. Bessent stated that deeper reforms of an antiquated financial regulatory system are needed and regulators should consider abandoning ‘flawed’ dual capital requirements for banks.
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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