USD/CHF slips to near 0.7900 as US-Iran ceasefire uncertainty prevails

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USD/CHF remains in the negative territory for the fourth successive day, trading around 0.7910 during the Asian hours on Thursday. The Swiss Franc (CHF) strengthens against the US Dollar (USD) on renewed safe-haven demand amid uncertainty over the United States (US)-Iran ceasefire.

USD/CHF depreciates as the US Dollar inches lower despite renewed safe-haven demand.
Iran’s Ghalibaf said the US breached three clauses of Iran’s proposal, calling further talks “unreasonable.”
Fed March Meeting Minutes suggest a wait-and-see stance, while acknowledging risks are becoming more balanced.

Iranian media reported a halt in tanker traffic through the Strait of Hormuz following fresh Israeli strikes in Lebanon. Iranian Parliament Speaker Mohammad Bagher Ghalibaf said the US breached three key clauses of Iran’s 10-point proposal, calling further talks “unreasonable.” Meanwhile, US Vice President JD Vance signaled that the strait could begin reopening as he leads a US delegation to Islamabad for direct talks with Iran this weekend.

The recent surge in oil prices drove Swiss inflation to its fastest annual pace of 0.3% in March, offsetting CHF strength and easing pressure on the Swiss National Bank (SNB) to adjust policy. The SNB kept its key rate unchanged at 0% for a third consecutive March meeting and reiterated its readiness to curb Franc appreciation.

Federal Reserve’s (Fed) March Meeting Minutes suggest the central bank remains in a wait-and-see stance, while acknowledging that risks are becoming more balanced. Policymakers broadly supported holding rates steady, with nearly all participants backing no change, and many viewing policy as already near a neutral range, implying a high bar for further tightening.

Traders will likely observe the US Consumer Price Index (CPI) report for March, due Friday. Headline inflation is expected to rise 3.3% year-over-year (YoY), up from 2.4%, driven by higher oil prices amid the Middle East conflict.

Swiss Franc FAQs

What key factors drive the Swiss Franc?

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.

Why is the Swiss Franc considered a safe-haven currency?

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.

How do decisions of the Swiss National Bank impact the Swiss Franc?

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.

How does economic data influence the value of the Swiss Franc?

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.

How does the Eurozone monetary policy affect the Swiss Franc?

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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