USD/CHF remains under selling pressure near 0.8550 amid Trump tariff turmoil
- USD/CHF faces some selling pressure to around 0.8550 in Tuesday’s early European session, down 0.60% on the day.
- Heightening concerns about economic growth boost the Swiss Franc, a safe-haven currency.
- The Swiss Unemployment Rate rose to 2.8% in a seasonally adjusted in March from the previous reading of 2.7%.
The USD/CHF pair attracts some sellers to near 0.8550 during the early European trading hours on Tuesday. The US Dollar (USD) weakens against the Swiss Franc (CHF) as the fears of a global recession heighten following US President Donald Trump's sweeping tariffs on trading partners.
Trump stated last week that tariffs of at least 10% on all US imports, with targets of up to 50%, would help the US reclaim an industrial base that he said has withered over decades of trade liberalization. Market turmoil unleashed by US trade tariffs and the ongoing geopolitical tensions could boost the CHF, a safe-haven currency.
Since Trump shocked world markets by announcing reciprocal tariffs for most of the global economy, more analysts have expected that the Swiss National Bank (SNB) will again cut the interest rates. Markets are currently leaning towards another 25 basis point (bps) rate cut by the Swiss central bank, according to LSEG data.
Data released by the State Secretariat for Economic Affairs (SECO) on Tuesday showed that the Swiss Unemployment Rate stood at 2.8% in a seasonally adjusted March, up from the previous reading of 2.7%.
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.