USD/CHF loses ground below 0.7800 as US shutdown fuels uncertainty despite upbeat PMI

USD/CHF softens to around 0.7780 in Tuesday’s early European session.
The House aims to vote on the government funding bill Tuesday amid a partial shutdown.
US Manufacturing PMI came in stronger than expected in January.

Lallalit Srijandorn FXStreet

The USD/CHF pair loses traction to near 0.7780 during the early European session on Tuesday. The US Dollar (USD) softens against the Swiss Franc (CHF) as a partial US government shutdown delays Nonfarm Payrolls data and raises concerns over the political stability in the US.

The House Rules Committee advanced a funding package late Monday. A full House floor vote is expected on Tuesday, which could end the shutdown if passed and signed by US President Donald Trump. This is the second government shutdown within a few months, after a record-breaking 43-day shutdown that ended in November 2025. If the current partial US shutdown extends, this could undermine confidence in US governance and exert some selling pressure on the Greenback.

Meanwhile, the United States (US) and Iran may hold diplomatic talks in Istanbul later on Friday as Trump weighs a possible military strike on the Islamic Republic. Traders will closely monitor the developments surrounding peace negotiations. Any signs of rising tensions between the US and Iran could boost traditional safe-haven currencies, such as the Swiss Franc and create a headwind for the pair.

On the other hand, the positive US economic data might help limit the USD’s losses. The Institute for Supply Management's (ISM) revealed on Monday that the US Manufacturing Purchasing Managers' Index (PMI) climbed to 52.6 in January, versus 47.9 prior. This reading beats the forecast of 48.5 and registered the strongest expansion since 2022. Traders reduced bets on Federal Reserve (Fed) rate cuts following the upbeat PMI data. Money markets showed the next reduction coming in July.

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.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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