USD/CHF recovery faces headwinds from Trump’s policies blunting SNB’s efforts – DBS

USD/CHF broke below its two-year range between 0.84 and 0.92 this month. USD/CHF hit a decade-low of 0.8040 on April 21 before recovering to 0.83 in the past two sessions. Before attempting to predict if USD/CHF has bottomed, it will be useful to revisit the previous episodes when USD/CHF hit even lower levels in 2011 and 2015 to provide a better understanding of the CHF’s strength and how the Swiss National Bank responded in each case, DBS' FX analyst Philip Wee note.

Uncertainty clouds USD/CHF rebound as policy risks persist

"In the first episode, USD/CHF bottomed at 0.7071 in August 2011. SNB targeted EUR/CHF, which was falling towards 1.00 in August 2011, from investors seeking safety during the Eurozone sovereign debt crisis. In September 2011, the SNB declared it would “no longer tolerate” a EUR/CHF rate below 1.210 and was prepared to buy unlimited foreign currency to enforce this minimum rate."

"In December 2024, SNB slashed interest rates by 50 bps to 0.50% amid USD strength, which lifted USD/CHF to near 0.92 in January 2024 from its 0.84 low in September 2024. Unfortunately, the landscape has become less conducive to countering the CHF’s strength in 2025. The SNB’s 25 bps rate cut to 0.25% on March 20 briefly supported USD/CHF around 0.88 but was overshadowed by Trump’s erratic and unpredictable tariff policy."

"Given Trump’s history of policy reversals, it is premature to conclude that USD/CHF’s rebound to 0.83 over the past two sessions is sustainable. With the IMF’s latest 2025 growth forecast for the US economy aligning closely with the Fed’s projection, Powell will likely maintain the Fed’s extended rate pause stance on inflation risks driven by Trump’s tariffs. However, if advance GDP growth for 1Q25 turns negative – as projected by the Atlanta Fed GDPNow model – Trump will likely attack Powell again."