USD/CHF holds gains near 0.8150 as Trump slaps 39% tariff on Swiss goods
- USD/CHF maintains its position as the Swiss Franc struggles following a 39% US tariff on imports from Switzerland.
- The Swiss government voiced deep regret that the final tariff decision differs substantially from the previous draft framework.
- The US Dollar rose as the Fed is expected to delay interest rate cuts until at least October.
USD/CHF holds ground after registering losses in the previous session, trading around 0.8130 during the early European hours on Friday. The pair appreciated as the Swiss Franc (CHF) faced challenges, driven by the US President Donald Trump’s imposition of a 39% tariff, one of the highest rates globally, on Swiss goods. The newly imposed US tariff on Swiss goods surpasses the 31% rate initially proposed in April, dimming prospects for a negotiated agreement.
The Swiss government expressed "great regret," emphasizing that the final tariff “differs significantly” from the draft framework previously under discussion. President and Finance Minister Karin Keller-Sutter stated on X that she had a final conversation with Trump, who remains focused on reducing the US trade deficit of USD 38 billion with Switzerland last year.
US President Donald Trump signed an executive order on Thursday, imposing tariff rates on US trading partners set to go into effect on August 1. The order includes tariffs ranging from 10% to 41% on US imports from dozens of countries and foreign locations, including Canada, India, and Taiwan, after failing to reach trade deals deadline.
The USD/CHF pair also draws support as traders expect the US Federal Reserve (Fed) to delay interest rate cuts until at least October. This hawkish sentiment increased following the recent US Personal Consumption Expenditure (PCE) Price Index report suggested that price pressures would increase in the second half of this year. Traders await the United States (US) Nonfarm Payrolls (NFP) due later in the day.
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.
Author
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
