Swiss Franc remains near 16-month lows as rate hike odds lift US Dollar
- USD/CHF rises amid rising Federal Reserve rate-hike expectations.
- CME FedWatch suggests that traders price in a 68% chance of an October Fed rate hike and 95% for December.
- Swiss KOF Leading Indicator climbed to 109.1, hitting its highest level in six years.
USD/CHF continues its winning streak for the sixth successive trading day, trading near its 16-month high of 0.8358 during Asian hours on Wednesday. The currency pair appreciates as the US Dollar (USD) gains ground, backed by firming market expectations for additional Federal Reserve (Fed) interest rate hikes.
CME FedWatch Tool data indicates that traders are currently pricing in nearly a 68% probability of a rate hike in October and a 95% likelihood of a 25-basis-point increase in December. Market focus now shifts to Friday's upcoming US Nonfarm Payrolls report, with economists anticipating an addition of 90,000 jobs in September and the Unemployment Rate holding steady at 4.1%.
Meanwhile, Switzerland's economic outlook showed notable strength as the Swiss KOF Leading Indicator improved to 109.1 in September, its highest level in six years. This beats expectations of a drop to 105.8 and follows an upwardly revised August reading of 107.5. Looking ahead, market participants will monitor the release of the Swiss ZEW Expectations survey for September alongside the Swiss National Bank's Third Quarter Quarterly Bulletin for further directional cues.
Analysts at Rabobank highlight that the Swiss National Bank has maintained its cautious stance, noting that “the SNB released its decision to hold the overnight policy rate at 0.0% at the September 24 meeting.” This unchanged setting comes against a backdrop of largely steady CHF positioning, even as market pricing on the OIS curve points to expectations for more than two SNB rate hikes by mid‑next year, offering some forward‑looking support for the Franc despite the current net short stance.
Technical Analysis:
In the daily chart, USD/CHF trades at 0.8350, extending its recovery above both the nine- and 50-period Exponential Moving Averages (EMAs), which reinforces a near-term bullish bias. The alignment of the shorter EMA above the longer one hints at strengthening upside momentum, while the 14-day Relative Strength Index (RSI) at 74.21 pushes into overbought territory, suggesting the rally could be stretched even as directional pressure remains positive and supported by an elevated FXS Fed Sentiment Index near 143.70.
On the downside, initial support is seen at the nine-period EMA around 0.8284, with a deeper corrective floor emerging at the 50-period EMA near 0.8152 if profit-taking accelerates. On the topside, while no precise price-based resistance has formed yet, the overbought RSI and high Fed Sentiment readings warn that upside may become increasingly vulnerable to a pullback as buyers test higher ground above 0.8345.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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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