- USD/CHF struggles as the US Dollar weakens amid growing concerns over a potential slowdown in the US economy.
- The Swiss Franc gains strength as trade tensions rise following China’s new tariffs of 10–15% on US agricultural goods.
- The Swiss National Bank is expected to implement a rate cut in March, with the possibility of another in June.
The USD/CHF pair continues its decline for the third consecutive day and is trading around 0.8790 during Monday’s Asian session. The US Dollar (USD) faces headwinds amid growing concerns about a potential slowdown in the US economy. However, further downside may be limited as US Treasury yields rise.
The US Dollar Index (DXY), which tracks the USD against six major currencies, has fallen for the fifth straight session and is hovering around 103.90. Meanwhile, 2- and 10-year yields on US Treasury bonds are standing at 3.98% and 4.28%, respectively, at the time of writing.
Safe-haven demand for the Swiss Franc (CHF) strengthens as trade tensions between the US and China escalate. In response to US President Donald Trump’s latest tariff hike on Chinese imports, Beijing has imposed new tariffs of 10–15% on select US agricultural goods, effective Monday.
Further fueling trade tensions, China announced a 100% tariff on Canadian agricultural goods in retaliation for tariffs imposed by Canada in October, further intensifying the broader trade conflict shaped by Trump’s tariff policies.
Additionally, US Commerce Secretary Howard Lutnick stated late Sunday that Trump’s planned 25% tariffs on steel and aluminum imports—set to take effect Wednesday—are unlikely to be delayed, according to Bloomberg.
Switzerland’s inflation rate eased to 0.3% in February, the lowest since April 2021, down from 0.4% in January. Meanwhile, the Swiss economy grew by 0.2% in Q4 2024, slowing from 0.4% in Q3 and marking its weakest expansion since Q2 2023. These trends have fueled speculation of further rate cuts by the Swiss National Bank (SNB), with markets expecting one in March and potentially another in June.
Swiss Franc FAQs
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.
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.
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.
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.
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.