USD/CHF rallies beyond 0.8100 with all eyes on trade talks and US CP

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The US Dollar appreciates, and the CHF extends losses on risk-on markets.
Investors are wary of betting against the US Dollar ahead of Tuesday's US CPI release.
Hefty US tariffs on Swiss imports are adding bearish pressure on the Swissie.

The Swiss Franc is struggling on Monday amid a moderate risk appetite, while the US Dollar appreciates across the board amid hopes of a US-China trade deal and investors’ reluctance of l¡placing large USD shorts ahead of Tuesday’s US CPI release.

In the absence of key fundamental releases on Monday, investors remain hopeful that the US and China will find common ground to extend their trade truce and avoid triple-digit tariffs that would bring global trade uncertainties back to the table.

The US wants China to buy more agricultural and technological products from the US to reduce its trade surplus with the US, while the Chinese have expressed security concerns about the H20 Nvidia chip. The deadline to reach an agreement is next Tuesday.

On the macroeconomic front, the focus is on the US consumer inflation figures, also due on Tuesday. The headline CPI is expected to have accelerated to a 2.9% year-on-year pace in July, from 2.8% in June. Likewise, the core inflation is seen rising to 3% from 2.9% in the previous month. Tomorrow’s CPI data will be read from a monetary policy approach and might have a significant impact on the USD.

The Swiss Franc, on the other hand, remains on the defensive after US President Trump decided to impose one of the highest tariffs on Swiss exports, at 39%, posing a serious threat to the Swiss export-driven economy and undermining support for the CHF.

Swiss economy FAQs

Where does Switzerland stand in terms of economic power?

Switzerland is the ninth-largest economy measured by nominal Gross Domestic Product (GDP) in the European continent. Measured by GDP per capita – a broad measure of average living standards –, the country ranks among the highest in the world, meaning that it is one the richest countries globally. Switzerland tends to be in the top spots in global rankings about living standards, development indexes, competitiveness or innovation.

Where does Swiss economic growth come from?

Switzerland is an open, free-market economy mainly based on the services sector. The Swiss economy has a strong export sector, and the neighboring European Union (EU) is its main trading partner. Switzerland is a leading exporter of watches and clocks, and hosts leading firms in the food, chemicals and pharmaceutical industries. The country is considered to be an international tax haven, with significantly low corporate and income tax rates compared with its European neighbors.

How does the Swiss economy impact the Swiss Franc’s valuation?

As a high-income country, the growth rate of the Swiss economy has diminished over the last decades. Still, its political and economic stability, its high education levels, top-tier firms in several industries and its tax-haven status have made it a preferred destination for foreign investment. This has generally benefited the Swiss Franc (CHF), which has historically kept relatively strong against its main currency peers. Generally, a good performance of the Swiss economy – based on high growth, low unemployment and stable prices – tends to appreciate CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

Do commodity prices impact the Swiss Franc’s valuation?

Switzerland isn’t a commodity exporter, so in general commodity prices aren’t a key driver of the Swiss Franc (CHF). However, there is a slight correlation with both Gold and Oil prices. With Gold, CHF’s status as a safe-haven and the fact that the currency used to be backed by the precious metal means that both assets tend to move in the same direction. With Oil, a paper released by the Swiss National Bank (SNB) suggests that the rise in Oil prices could negatively influence CHF valuation, as Switzerland is a net importer of fuel.