- With tariff disruption boosting safe-haven inflows, USD/CHF currently trades at around 0.81562, a level last seen in September 2011
- Rapid appreciation of the Swiss franc’s value could prove a cause for concern for the SNB, with already some suggestion of intervention
- US treasury yields in sharp decline amid market uncertainty and volatile trading conditions
With FX markets heating up considerably in recent weeks, the Swiss franc remains one of the best-performing major currencies amid a flight to safety and wavering risk appetite.
Starting the year somewhat unremarkably, heightened geopolitical tensions, especially regarding tariffs and global trade, are currently weighing heavily on the USD/CHF exchange rate.
With last week being the pair’s worst performance in over 125 months, recent bear pressure saw USD/CHF break previous monthly support held around ~0.84414. Now trading at a level last seen during the height of the Greek government debt crisis, USD/CHF will need to find support or risk a further leg down towards 0.81000.
A chart showing the recent price action of USD/CHF. OANDA, TradingView, 15/04/2024.
USD/CHF: Tariffs, trade wars and global trade
The announcement of sweeping global tariffs and their potential impact on international trade has undeniably been the most significant deciding factor in USD/CHF in recent weeks.
Trading around ~7.35% lower since President Trump’s now-infamous “Liberation Day,” the outcome of recent announcements has been decidedly clear for USD/CHF exchange pricing – a weaker dollar and stronger franc.
Fig 1: Currency Power Balance tool (Source: OANDA Global Markets)
Benefiting from broader safe-haven inflows and general market uncertainty, recent announcements of a 90-day deferment of “reciprocal” tariffs bar China have done little to slow USD/CHF’s descent to new lows, with market attention focused on how the United States will navigate trade relations with some of its key trading partners, namely the European Union and China.
The latter has only recently been subject to a staggering 145% levy on most imports to the US, with fears of an escalating ‘trade war’ between the US and China being more prevalent now than in recent memory, with key imports like semiconductors, lithium-ion batteries, and steel to be caught in the crossfire.
As for USD/CHF pricing, any worsening of trade tensions or a general widening of tariff restrictions globally will increase market risk aversion and likely weigh negatively on USD/CHF in the short term.
USD/CHF: How will the SNB approach a stronger franc?
Playing second fiddle to the euro for much of Q1, the sudden appreciation in the franc’s value will undoubtedly have caught the watchful eye of the Swiss National Bank (SNB).
Trading at multi-year highs versus the dollar, yen, and pound, the SNB has previously warned of the dangers of a too-strong franc. Citing the competitiveness of exports, the SNB is now faced with the unique challenge of managing rates while the threat of tariffs as high as 31% on most Swiss exports loom, further compounded by a stronger currency.
With excessive inflation a non-issue in the Swiss economy, the recent bout of franc strength has some already speculating that the SNB may explore the possibility of zero percent or even negative interest rates in an attempt to halt a runaway strengthening of the currency.
While this remains somewhat unlikely for now, an interest rate cut in the SNB’s June decision may become a stronger possibility should USD/CHF pricing continue its current trajectory.
USD/CHF: Technical analysis & outlook
- Having broken previously held support around ~0.84414, USD/CHF now flirts with the key level of 0.81000. Should the price break down further, bears will likely target 0.80202
- According to the daily 14-period ATR, USD/CHF markets are currently rated ‘oversold’ for the first time since August 2024. When taken at face value, this could suggest the current move is exhausted and will need to consolidate before a further leg down. US treasury yields in sharp decline amid market uncertainty and volatile trading conditions
- For only the fourth time in ten years, USD/CHF currently trades with a daily ATR reading in excess of 120 pips, suggesting markets are highly volatile
