• The US Dollar weakens against the Swiss Franc amid a renewed risk-off mood.
• Uncertainty surrounding US trade policy and concerns over the independence of the Fed weigh on the USD.
• The decision to keep US interest rates unchanged reinforces a cautious bias in markets.

USD/CHF trades around 0.7660 on Thursday at the time of writing, down 0.40% on the day, under pressure from a broadly weaker US Dollar (USD) and increased demand for safe-haven currencies. The Swiss Franc (CHF) benefits from a market environment marked by political uncertainty in the United States (US), persistent geopolitical tensions, and growing questions over the credibility of US institutions.

The US currency remains weighed down by an unpredictable trade policy, as well as debates surrounding the independence of the Federal Reserve (Fed). At its latest meeting, the US central bank decided to leave the Federal Funds Rate unchanged in a range of 3.5% to 3.75%. Fed Chair Jerome Powell said the current stance of monetary policy is considered appropriate to achieve the goals of maximum employment and price stability, a message that nonetheless failed to restore investor confidence in the Greenback.

Concerns over a new US budget impasse are also undermining the US Dollar. The lack of visibility regarding funding for certain federal agencies has revived worries about economic governance in the country, fueling flows into safe-haven assets. In this context, the Swiss Franc fully benefits from its defensive status, especially as geopolitical tensions in the Middle East reinforce investor caution.

According to analysts at MUFG, the loss of confidence in US economic policymaking has revived fears of long-term currency debasement, supporting demand for the Swiss Franc as a store of value. The bank notes that this dynamic could increase pressure on the Swiss National Bank (SNB) if the CHF continues to appreciate. For its part, BNY believes the SNB is likely to adopt a cautious approach and wait for new inflation projections before considering any policy adjustment, while ruling out a return to negative rates for now.

Overall, the combination of a US Dollar weakened by political and institutional uncertainty and a Swiss Franc supported by safe-haven flows keeps USD/CHF under pressure in the near term, despite the relatively neutral tone adopted by the US central bank.