USD/CHF slides to two-month low as US-Iran deal hopes weigh on Dollar
- USD/CHF falls to its lowest level since March 10 as hopes for a US-Iran peace deal pressure the US Dollar.
- Falling Oil prices ease inflation concerns and temper hawkish Federal Reserve expectations.
- Swiss inflation rises to 0.6% YoY in April, though it remains below the SNB’s 2% target.
The Swiss Franc (CHF) strengthens against the US Dollar (USD) on Thursday as renewed hopes for a possible US-Iran peace deal pressure the Greenback. At the time of writing, USD/CHF is trading around 0.7766, its lowest level since March 10.
Markets continue to monitor developments surrounding the US-Iran negotiations, awaiting further clarity after Iran confirmed it is reviewing the latest US-backed proposal aimed at ending the war in the Middle East. Meanwhile, US President Donald Trump struck a positive tone on the talks, telling reporters at the White House on Wednesday, “We’ve had very good talks over the last 24 hours, and it’s very possible that we’ll make a deal.”
The latest proposal reportedly includes Iran pausing nuclear enrichment, while the US would lift sanctions and release billions of US Dollars in frozen Iranian funds. Both sides are also expected to end the blockade around the Strait of Hormuz.
In reaction to the latest optimism, Oil prices plunged, and the US Dollar Index (DXY) has slid back toward pre-war levels. The DXY, which tracks the Greenback’s value against a basket of six major currencies, is trading around 97.88, down roughly 0.15% on the day.
Meanwhile, traders are reassessing the Federal Reserve’s (Fed) monetary policy path as the decline in Oil prices helps reduce inflation risks and tempers the hawkish expectations that had recently built in the market.
Fed officials remain cautious about resuming monetary policy easing. Speaking on Thursday, Cleveland Fed President Beth Hammack said the baseline outlook is for interest rates to remain on hold “for a long period.” Hammack also warned that the Iran conflict could affect both sides of the Fed’s mandate and noted that cutting interest rates beyond justified levels would risk boosting inflation.
On the data front, US Initial Jobless Claims rose to 200K in the week ending May 2, up from the previous week’s 190K reading but slightly below market expectations of 205K. Traders now await the Nonfarm Payrolls (NFP) report due on Friday for fresh clues on the Federal Reserve’s monetary policy outlook.
On the Swiss side, inflation picked up for a second consecutive month due to rising energy prices. Switzerland’s Consumer Price Index (CPI) accelerated to 0.6% YoY in April from 0.3% in March, marking the highest reading since late 2024. On a monthly basis, CPI rose 0.3% MoM. However, inflation remains well below the Swiss National Bank’s (SNB) 2% target, supporting the central bank’s current hold stance.
SNB FAQs
The Swiss National Bank (SNB) is the country’s central bank. As an independent central bank, its mandate is to ensure price stability in the medium and long term. To ensure price stability, the SNB aims to maintain appropriate monetary conditions, which are determined by the interest rate level and exchange rates. For the SNB, price stability means a rise in the Swiss Consumer Price Index (CPI) of less than 2% per year.
The Swiss National Bank (SNB) Governing Board decides the appropriate level of its policy rate according to its price stability objective. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame excessive 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.
Yes. The Swiss National Bank (SNB) has regularly intervened in the foreign exchange market in order to avoid the Swiss Franc (CHF) appreciating too much against other currencies. A strong CHF hurts the competitiveness of the country’s powerful export sector. Between 2011 and 2015, the SNB implemented a peg to the Euro to limit the CHF advance against it. The bank intervenes in the market using its hefty foreign exchange reserves, usually by buying foreign currencies such as the US Dollar or the Euro. During episodes of high inflation, particularly due to energy, the SNB refrains from intervening markets as a strong CHF makes energy imports cheaper, cushioning the price shock for Swiss households and businesses.
The SNB meets once a quarter – in March, June, September and December – to conduct its monetary policy assessment. Each of these assessments results in a monetary policy decision and the publication of a medium-term inflation forecast.
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