USD/CHF tumbles to below 0.8150 ahead of Trump’s tariff deadline

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USD/CHF softens to near 0.8125 in Thursday’s early European session, down 0.31% on the day.
Trade uncertainty continues to underpin the Swiss Franc, a safe-haven currency.
FOMC voted 9-2 to keep rates where they are at the July meeting on Wednesday, as widely expected.

The USD/CHF pair drifts lower to around 0.8125 during the early European trading hours. The Greenback weakens against the Swiss Franc (CHF) despite the hawkish stance from the US Federal Reserve officials. Traders brace for further developments surrounding tariff policies ahead of US President Donald Trump’s deadline.

On Wednesday, Trump said that the United States (US) would charge a 15% tariff on imports from South Korea. The agreement includes a $350 billion commitment from South Korea toward US-owned and controlled investments. Meanwhile, US Commerce Secretary Howard Lutnick said that the US has made trade agreements with Cambodia and Thailand.

Traders will keep assessing the 25% duties on imports from India, along with an unspecified “penalty.” Trade uncertainty stemming from fresh US tariff announcements could boost demand for safe-haven currencies such as the CHF and create a headwind for the pair.

On the other hand, reduced expectations of a US rate cut might help limit the USD’s losses. The US Fed policymakers voted to keep the key interest rate at the target range of 4.25% to 4.50% at its July meeting on Wednesday, where it has been since December.

Fed Chair Powell reiterated that the Fed remains data-dependent when it comes to making monetary decisions in the coming months, adding that the central bank will carefully monitor the labor market for any signs of weakness ahead. The attention will shift to the US employment data for July, which will be published later on Friday.

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.