- USD/CHF depreciates as traders expect the Federal Reserve to implement a 50 basis point rate cut.
- The CME FedWatch Tool indicates the likelihood of a 50 basis point cut has risen to 67.0%.
- The Swiss National Bank is expected to deliver a 25 basis point rate cut at its September meeting.
USD/CHF retraces its recent gains, trading around 0.8450 during the Asian hours on Wednesday. The US Dollar (USD) faces challenges amid rising expectations that the US Federal Reserve (Fed) may announce a substantial 50 basis point rate cut at September’s meeting scheduled later in the North American session.
The CME FedWatch Tool indicates that markets are assigning a 33.0% probability to a 25-basis-point rate cut, while the likelihood of a 50 basis point cut has risen to 67.0%, up from 62.0% just the previous day.
On Tuesday, JP Morgan CEO Jamie Dimon remarked that whether the Fed cuts interest rates by 25 or 50 basis points, the impact will be “not earth-shattering.” Dimon emphasized that while the Fed needs to make these adjustments, such rate changes are relatively minor in the broader context, as "there's a real economy" operating beyond the Fed’s rate modifications, according to Bloomberg.
On Tuesday, US Retail Sales increased by 0.1% MoM in August, following a revised 1.1% growth in July, surpassing expectations of a 0.2% decline and indicating resilient consumer spending. Meanwhile, the Retail Sales Control Group rose by 0.3%, slightly below the previous month's 0.4% increase.
On the CHF front, traders are likely to pay close attention to the Trade Balance data scheduled for release on Thursday. This report could provide valuable insights into the Swiss economic conditions. Moreover, the solid Swiss Franc (CHF) is leading to speculation that the Swiss National Bank (SNB) could be the first major central bank to implement a significant rate cut this year. Economists are forecasting that the Swiss National Bank (SNB) might announce a 25 basis point rate cut at its September meeting.
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD keeps the range bound trade near 1.1350
After bottoming near the 1.1300 level, EUR/USD has regained upward momentum, pushing toward the 1.1350 zone following the US Dollar’s vacillating price action. Meanwhile, market participants remain closely tuned to developments in the US-China trade war.
GBP/USD still well bid, still focused on 1.3200
The Greenback's current flattish stance lends extra support to GBP/USD, pushing the pair back to around the 1.3200 level as it reaches multi-day highs amid improved risk sentiment on Monday.
Gold trades with marked losses near $3,200
Gold seems to have met some daily contention around the $3,200 zone on Monday, coming under renewed downside pressure after hitting record highs near $3,250 earlier in the day, always amid alleviated trade concerns. Declining US yields, in the meantime, should keep the downside contained somehow.
Six Fundamentals for the Week: Tariffs, US Retail Sales and ECB stand out Premium
"Nobody is off the hook" – these words by US President Donald Trump keep markets focused on tariff policy. However, some hard data and the European Central Bank (ECB) decision will also keep things busy ahead of Good Friday.
Is a recession looming?
Wall Street skyrockets after Trump announces tariff delay. But gains remain limited as Trade War with China continues. Recession odds have eased, but investors remain fearful. The worst may not be over, deeper market wounds still possible.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.