USD/CHF weakens below 0.8850 amid geopolitical tensions

USD/CHF loses traction to near 0.8830 in Tuesday’s early European session.
Trump said he may give some countries breaks on reciprocal tariffs.
Middle East geopolitical tensions could boost the safe-haven flows, supporting the CHF.

Lallalit Srijandorn FXStreet

The USD/CHF pair weakens to around 0.8830 during the Asian trading hours on Tuesday, pressured by a decline in the US Dollar (USD). Traders will keep an eye on the US Conference Board’s Consumer Confidence gauge, New Home Sales and the Richmond Fed Manufacturing Index, which will be released later on Tuesday.

Data released by the S&P Global on Monday showed that the US Composite PMI rose to 53.5 (preliminary) in March from 51.6 in February. Meanwhile, the Manufacturing PMI dropped to 49.8 in March versus 52.7 prior, missing the estimation of 51.9. The Services PMI improved to 54.3 in March from 51.0 in February, above the market consensus of 51.2. The mixed US PMI reports have failed to boost the Greenback.

President Donald Trump said not all of his threatened levies would be imposed on April 2. Trump signaled that some trading partners would receive possible exemptions or reductions. The uncertainty surrounding the Trump tariff policies could weigh on the Greenback against the Swiss Franc (CHF).

Meanwhile, the rising geopolitical tensions in the Middle East could boost the safe-haven flows, benefiting the CHF. Israel continues to carry out airstrikes in Gaza, ending a nearly two-month ceasefire with Hamas. Israeli Prime Minister Benjamin Netanyahu vowed to act "with increasing military strength" to free hostages and disarm Hamas.

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.

BRANDED CONTENT

Finding a broker with low spreads can make a big difference in your trading success. Discover our top picks for low-spread brokers, each offering unique benefits to fit your strategy.

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.

GBP/USD eases toward 1.3500 on geopolitical tensions, hawkish Fed bets

GBP/USD trades with mild losses below 1.3550 in the European session. The US Dollar recovers some ground amid ongoing Middle East tensions and hawkish expectations around the Fed's interest rate outlook, weighing on the pair ahead of US data releases.

EUR/USD struggles near 1.1600, awaits Eurozone HICP for impetus

EUR/USD struggles to capitalize on the overnight bounce and drifts near 1.1600 in European trading hours on Tuesday. The pair remains under pressure amid a modest US Dollar rebound. Traders now look to the preliminary reading of the Eurozone Harmonized Index of Consumer Prices (HICP) for fresh trading impetus.

Gold seems vulnerable below $4,450 amid Fed hike bets and Iran risks

Gold sticks to modest intraday losses around the $4,430 region heading into the European session, and remains well within striking distance of a one-and-a-half-week low, which was touched the previous day. US Federal Reserve Chair Kevin Warsh's comments last Friday lifted market bets for an imminent interest rate hike and undermined the non-yielding yellow metal.

Ripple, Cardano, and Dogecoin show weakness – Crucial EMAs in focus

Ripple, Cardano, and Dogecoin remain weak after double-digit losses last week, testing their crucial Exponential Moving Averages for immediate support. The technical outlook warns of further weakness in the prices of XRP, ADA, and DOGE as bullish momentum eases.

Bond markets again show a long series of “highest yield since” headlines

The rise in global yields continues unabatedly. Ongoing elevated oil/energy prices, markets anticipating tighter monetary policy and higher (fiscal) risk premia all are possible explanations for this trend move. Ongoing tensions in the Middle East pushed the oil price back to the $90/b area. While the move wasn’t that big as such, it supported a higher for longer narrative.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.