USD/CHF weakens below 0.8850 on tariff uncertainty
- USD/CHF softens to near 0.8825 in Thursday’s early European session.
- Investors worry that the trade war will dent US growth, weighing on the US Dollar.
- The economic outlook is more uncertain, said SNB Quarterly Bulletin.
The USD/CHF pair trades on a softer note around 0.8825 during the early European session on Thursday. The concerns over a global trade war and the ongoing geopolitical tensions boost the safe-haven asset like the Swiss Franc (CHF). Investors await the final Gross Domestic Product (GDP) for the fourth quarter (Q4), weekly Initial Jobless Claims and Pending Home Sales, which will be released later on Thursday.
Uncertainty over the tariff outlook and the fears that US President Donald Trump’s trade policies will slow the global economy and dent corporate profits undermine the Greenback against the CHF. Trump stated on Monday that automobile tariffs will be implemented shortly, but that not all of his threatening duties would be levied on April 2 and some nations may get exemptions. He also imposed 25% secondary tariffs on any nation that purchased oil or gas from Venezuela.
Investors will closely monitor the reciprocal tariffs due to be announced next week. Trump hinted that the measures may not be the like-for-like levies he has been pledging to impose. Any positive developments surrounding trade policies could lift the US dollar (USD) in the near term.
The Swiss National Bank (SNB) warned in its quarterly bulletin released on Wednesday that the economic outlook for Switzerland and the rest of the world has become "considerably more uncertain" due to ongoing geopolitical risks around the world, as well as tariff threats by Trump.
The SNB acknowledged that the CHF depreciated against the Euro and the Greenback after the December interest rate cut. The Swiss central bank vowed to "use additional monetary policy measures to influence the exchange rate or the interest rate level,” if necessary.
Swiss economy FAQs
Switzerland is the ninth-largest economy measured by nominal Gross Domestic Product (GDP) in the European continent. Measured by GDP per capita – a broad measure of average living standards –, the country ranks among the highest in the world, meaning that it is one the richest countries globally. Switzerland tends to be in the top spots in global rankings about living standards, development indexes, competitiveness or innovation.
Switzerland is an open, free-market economy mainly based on the services sector. The Swiss economy has a strong export sector, and the neighboring European Union (EU) is its main trading partner. Switzerland is a leading exporter of watches and clocks, and hosts leading firms in the food, chemicals and pharmaceutical industries. The country is considered to be an international tax haven, with significantly low corporate and income tax rates compared with its European neighbors.
As a high-income country, the growth rate of the Swiss economy has diminished over the last decades. Still, its political and economic stability, its high education levels, top-tier firms in several industries and its tax-haven status have made it a preferred destination for foreign investment. This has generally benefited the Swiss Franc (CHF), which has historically kept relatively strong against its main currency peers. Generally, a good performance of the Swiss economy – based on high growth, low unemployment and stable prices – tends to appreciate CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
Switzerland isn’t a commodity exporter, so in general commodity prices aren’t a key driver of the Swiss Franc (CHF). However, there is a slight correlation with both Gold and Oil prices. With Gold, CHF’s status as a safe-haven and the fact that the currency used to be backed by the precious metal means that both assets tend to move in the same direction. With Oil, a paper released by the Swiss National Bank (SNB) suggests that the rise in Oil prices could negatively influence CHF valuation, as Switzerland is a net importer of fuel.
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