USD/CHF climbs to near 0.8150 as Trump hits Switzerland with 39% tariff rate

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The USD/CHF pair gathers strength to near 0.8145 during the early Asian session on Friday. The Swiss Franc (CHF) weakens against the US Dollar (USD) after the US President Donald Trump set a 39% tariff on goods from Switzerland.

USD/CHF drifts higher to around 0.8145 in Friday’s early Asian session, up 0.22% on the day.
Trump hit Switzerland with a 39% tariff rate.
Traders will closely watch the US July employment report, which is due later on Friday.

The White House stated late Thursday that Trump will keep minimum global tariff rates at 10%, resisting prior suggestions he could raise the floor to 15% or higher. However, Trump has hammered Switzerland with a 39% tariff rate. The CHF is underperforming G-10 peers after a surprisingly high tariff rate was imposed on Switzerland.

The US Federal Reserve (Fed) decided to hold its benchmark federal funds rate in a range of 4.25%-4.5% at its July meeting on Wednesday, as widely expected. Fed Chair Jerome Powell stated during the press conferne that the US central bank has “made no decisions” about a potential policy change in September and it may take a bit to assess the effect of tariffs on consumer prices.

Traders will closely monitor the release of US employment data for July later on Friday. The US economy is expected to add 110K jobs in July, while the Unemployment Rate is projected to rise to 4.2% from 4.1% during the same period.

Additionally, the US Average Hourly Earnings is estimated to increase to 3.8% YoY in July from 3.7% in the previous reading. If the reports show weaker-than-expected outcomes, this might weigh on the USD and act as a headwind for the pair.

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.