- USD/CHF struggles as the Swiss Franc strengthens on rising safe-haven demand.
- President Trump said that he had “obliterated” Iran’s main nuclear sites, including Fordow, Natanz, and Isfahan.
- Fed Governor Christopher Waller said that the US central bank could start easing policy as soon as next month.
USD/CHF edges lower after registering gains in the previous session, trading around 0.8170 during the Asian hours on Monday. The pair depreciates as the Swiss Franc (CHF) receives support from the increased safe-haven demand, driven by the United States (US) attacks on three Iranian nuclear facilities over the weekend.
US President Donald Trump announced late Saturday that he had “obliterated” Iran’s main nuclear sites, including Fordow, Natanz, and Isfahan, in strikes overnight, in coordination with an Israeli assault. This Middle East conflict is poised to escalate as Tehran vowed to defend itself.
Last week, the data showed that Switzerland’s trade surplus declined to CHF 2.0 billion in May from a downwardly revised CHF 5.4 billion in April. The Swiss trade balance has marked the smallest surplus since December 2023. Traders will likely observe the ZEW Survey – Expectations for June and the SNB Quarterly Bulletin for the second quarter, scheduled to be released on Wednesday.
In the United States (US), Federal Reserve (Fed) Governor Christopher Waller noted on Friday that the US central bank could start easing monetary policy as soon as next month, signaling flexibility amid global economic uncertainty and rising geopolitical risks. However, Fed Chair Jerome Powell warned earlier that ongoing policy uncertainty will keep the central bank in a rate-hold stance, and any rate cuts will be contingent on further improvement in labor and inflation data.
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.
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Editors’ Picks
EUR/USD struggles near 1.1500 ahead of Eurozone PMI data
EUR/USD is struggling with its recovery near 1.1500 in European trading on Monday. The pair continues to face headwinds from sustained US Dollar demand amid Middle East tensions. Meanwhile, traders refrain from placing fresh bets on the major ahead of the Eurozone and US PMI data.
GBP/USD holds recovery above 1.3400, with eyes on UK PMI, Middle East woes
GBP/USD is holding its rebound above 1.3400 in the European session on Monday. The fears that Iran would retaliate against US attacks on its nuclear sites continue to support the safe-haven US Dollar. Investors await the June preliminary PMI readings from the UK and the US for fresh trading directives.
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