- The USD/CHF weakened around 0.8270 in the first European session of Monday.
- Uncertainty and tariff concerns will boost safe flow, which supports the Swiss Franc.
- The Fed remains in a blackout period leading to the FOMC meeting on May 7.
The USD/CHF pair attracts some sellers near 0.8270 during the early European session on Monday. Trade-related uncertainty between the US and China and ongoing geopolitical risks boost the safe demanding demands, benefiting the Swiss Franc (CHF). The initial reading of the US Gross Domestic Product (GDP) for the first quarter (Q1) and the April working report will be highlights next week.
U.S. President Donald Trump said he had a development and he spoke with China President Xi Jinping. However, Treasury Secretary Scott Bescent said on Sunday that he didn't know if Trump had spoken to Xi Jinping. Bescent said he contacted the Chinese authorities last week but did not mention tariffs. Also, Beijing has denied that trade negotiations are taking place. The uncertainty surrounding the trade policy between the two largest economies in the world is subject to safe money such as CHF and acting as a headwind for USD/CHF.
Entrepreneurs have raised their bets that the US Federal Reserve (FED) will continue its cutting rate in June and lower borrowing costs by a full percentage point in 2025. In turn, it can drag less than the greenback. Meanwhile, the Fed remains in the Blackout mode of the Federal Open Market Committee (FOMC) meeting on May 7.
Entrepreneurs will be guarding the initial US Q1 GDP report and working data in April this week, as it may offer some clues about the next Fed policy decisions and the US economy perspective. The expectation for April is that the US economy will add 130,000 jobs and the unemployment rate will remain at 4.2%. If reports show a stronger than expected outcome, it can lift the US (USD) dollar against the CHF in the near term.
Swiss Franc Faqs
Swiss Franc (CHF) is Switzerland's official currency. It is among the top ten most traded currencies in the world, reaching out to volumes that greatly exceed the size of the Swiss economy. Its value is determined by the widespread feelings of the market, economic health or action of the country made by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was on Euro (EUR). The peg was suddenly removed, resulting in more than 20% increase in Franc value, causing disturbance in markets. Although the PEG is no longer forced, CHF's fortunes tend to be very linked to euros due to the high hope of Switzerland's economy in the nearby eurozone.
Swiss Franc (CHF) is considered a safe property, or a currency whose investors tend to buy at times of stress on the market. This is due to Switzerland's noticeable status in the world: a stable economy, a powerful export sector, large central bank reserves or a long -term political stance towards the international conflict that makes the country a great choice for investors to flee from risks. The chaotic times are likely to strengthen the value of CHF against other currencies that are seen as more risk to invest.
The Swiss National Bank (SNB) meets four times a year – once per quarter, below other major central banks – to decide on the financial policy. Bank aims for an annual inflation rate of less than 2%. When inflation is above the target or that -forecast beyond the target in the predictable future, the bank will try to handle price growth by increasing its policy rate. Higher interest rates are usually positive for the Swiss Franc (CHF) as they lead to higher yields, making the country more attractive -the country is more attractive for investors. Conversely, lower interest rates tend to soften the CHF.
The release of macroeconomic data to Switzerland is key to economic state analysis and may affect the Swiss Franc (CHF) appreciation. Swiss's economy is widely stable, but any sudden changes in economic growth, inflation, current account or central bank reserves have the potential to resolve chf movements. Usually, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to momentum weakening, CHF is likely to deduct.
As a small and open economy, Switzerland depends greatly on the health of the neighboring economies of the eurozone. The broader European Union is the main economic partner of Switzerland and a major political ally, so the stability of macroeconomic policy and eurozone policy is important for Switzerland and, thus, for the Swiss Franc (CHF). In such a hope, some models suggest that the relationship between the fate of the Euro (EUR) and the CHF is over 90%, or close to perfect.
