USD/CHF: Dollar-franc finds support at monthly low on US-EU trade optimism

[Redator]

Currently trading at ~0.79632, USD/CHF has found support at previous monthly lows of around ~0.78309.

Having recently suffered its worst 6-monthly performance since 2010, losing over 12% in value, ongoing negotiations to suggest the US and the EU are ‘edging closer’ to a trade deal have offered some short-term USD/CHF buying pressure.

USD/CHF: Key takeaways from today’s session

• Signifying a welcome episode of co-operation between the two economies, recent commentary from both the White House and the EU suggests negotiations on trade are proving fruitful, with US officials ‘optimistic’ that a deal is to be struck
• Otherwise, markets are adjusting expectations on SNB monetary policy, owing to recent Swiss CPI data showing that inflation is hotter than expected

USD/CHF: Swiss franc remains the best-performing major currency of 2025

If asked which currency has benefited most from the current cocktail of macroeconomic themes on offer in 2025, the answer would undeniably be the Swiss franc - at least so far.

While at least some of the recent CHF strength can be explained by safe-haven inflows seen in the first half of the year, the complete answer lies in comparing the Swiss franc to other typical ‘safe-haven’ currencies.

JXY, DXY & SXY, TVC, 24/07/2025

In the case of the U.S. dollar, it would be fair to say that its status as ‘world currency’ has come under pressure in recent months.

Owing to snowballing U.S. debt and polarising policy changes courtesy of 47th POTUS Donald Trump, it would appear that the root cause of the aforementioned safe-haven inflows comes predominantly from the United States itself, whether from the White House or otherwise.

The most significant of these is trade tariffs, synonymous with the Trump campaign, which boosts market risk aversion, especially when agreements between the US and other key nations appear unlikely to be met.

Whereas the dollar typically benefits from safe-haven demand, it seems that this time, it can only watch from the sidelines as investors choose to look elsewhere for a more secure, reliable, and dependable store of wealth.

In comparison, the Japanese yen has benefited much more than the dollar in terms of safe-haven demand, but still, for the most part, has played second fiddle to the Swiss franc for much of 2025.

Put simply, the reasons are threefold:

1. Making a significant U-turn from ultra-loose monetary policy in recent years, the use of the Japanese yen as a ‘funding’ currency for carry trades is changing. Whereas previously, in times of low market risk appetite, traders would often liquidate yen carry trades, driving yen strength, changes made by the BoJ to raise interest rates have severely disincentivised such strategies. As such, at least one outcome is that the yen does not strengthen as much as the franc in times of high safe-haven demand, as seen in recent months
   
   
2. Unlike the SNB, the Bank of Japan’s decision to raise rates in recent years signifies broader changes to the yen’s standing amongst other major currencies. As such, and while the yen finds its footing, investors are less likely to prefer the yen as a store of wealth in times of economic uncertainty
   
   
3. While the Swiss economy boasts one of the lowest debt-to-GDP levels in the developed world, at around 38%, the same cannot be said for the Japanese economy, which exceeds 250%. With government debt a hot topic courtesy of recent developments in the United States, markets are understandably somewhat nervous to use the yen as a store of wealth, especially in times of economic hardship

While the Swiss economy admittedly has much to boast about, the recent strengthening of the franc has much to do with the appeal, or lack thereof, of other safe-haven currencies in comparison.

USD/CHF: Imminent US-EU trade deal to offer support to USD/CHF

Put simply, lessened tensions between key trading partners, like the United States and European Union, are not only positive for the dollar but also help lessen safe-haven demand, causing some CHF downside.

The outcome, at least for now, has been some USD/CHF buying support around monthly lows, as the EU looks set to avoid a 30% tariff on all US-bound exports in favour of a more tame 15%.

It should also be noted that recent dollar downside has been caused in large part by nervousness about tariffs, and any change in perceptions, especially regarding likely agreements between key US trading partners, will likely offer significant dollar support.

"The sooner this trade uncertainty is resolved, the less uncertainty we’ll have to deal with"

Christine Lagarde, ECB President, Monetary Policy Statement Press Conference 24/07/2025

USD/CHF: MoM inflation at 0.1% readjusts market expectations of SNB rate cuts

Keen to avoid deflationary pressures for the first half of the year, recent inflation figures from the Swiss economy are not only economically encouraging, but also have markets readjusting SNB rate cut expectations.

Previously thought to be considering a return to negative interest rates to raise inflation closer to the target of 2%, recent CPI data shows that inflation is rising faster than expected, reining in market expectations for further rate cuts.

While expectations of a higher SNB base interest rate are typically CHF-positive, a growing sense of uncertainty surrounding Swiss monetary policy has led to some short-term downside, especially after an extended period of rally.

Opinions are the authors'; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. The provided publication is for informational and educational purposes only.
If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please refer to the MarketPulse Terms of Use.
Visit https://www.marketpulse.com/ to find out more about the beat of the global markets.
© 2025 OANDA Business Information & Services Inc.