In the early European session on Wednesday, the USD/CHF currency pair continued its downward spiral, trading in negative territory for the third consecutive day. It tumbled below the 0.8450 mark and was hovering around 0.8435. This decline came as a result of the prevailing risk – off mood in the markets, which was triggered by escalating trade tensions and fears of a global recession.
Tariff Turmoil Fuels Safe – Haven Demand
The ongoing tariff turmoil, particularly the sweeping tariffs imposed by US President Donald Trump, has led to a significant increase in risk aversion among traders. In such uncertain times, the Swiss Franc (CHF), known as a safe – haven currency, has become a popular choice for investors looking to protect their assets. The uncertainty surrounding trade policies and the potential economic slowdown in the United States have cast a shadow over the US Dollar (USD), leading to selling pressure.
According to the CME FedWatch tool, markets are pricing in a nearly 65% chance of a rate cut by the Federal Reserve (Fed) in May. Futures also indicate that there could be around 100 basis points (bps) worth of rate reductions by December. These expectations of looser monetary policy in the US have further weakened the greenback.
On Tuesday night, the US Customs and Border Protection announced its readiness to collect country – specific tariffs from 86 US trade partners. Despite requests from trade partners to avoid these levies, President Trump has shown little inclination to pause his plans for additional tariffs. However, he did hint at the possibility of some negotiations. This uncertainty has only added to the market’s jitters and boosted the demand for the Swiss Franc.
Swiss Franc’s Outlook Amid Trade Policy Uncertainty
Trump’s decision to impose reciprocal tariffs on a large part of the global economy, with relatively heavier tariffs on Switzerland compared to its European neighbors, has had a significant impact on the Swiss economy. Economists have revised down their forecasts for Swiss economic growth, and there are expectations that the Swiss National Bank (SNB) will cut interest rates again. According to LSEG data, markets are currently anticipating another 25 – basis – point rate cut by the Swiss central bank.
Related Topics:
USD/CHF Tumbles Amid Trump Tariff Uncertainty; US NFP Data in Focus
USD/CHF Dips Below 0.8800 on Trade War Jitters
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