Swiss Franc gains as US Dollar eases amid easing Fed rate hike odds

USD/CHF depreciates as easing October Fed rate-hike bets weigh on the US Dollar.
High US Treasury yields and persistent inflation concerns from elevated energy costs limit further Swiss Franc gains.
Commerzbank analysts believe that the SNB will remain focused on inflation rather than immediate rate hikes.

USD/CHF extends its losses for the second consecutive day, trading around 0.8290 during Asian hours on Friday. The pair depreciates as the US Dollar (USD) struggles amid easing Federal Reserve (Fed) rate hike bets, with markets pricing in nearly a 28% chance of an October rate increase according to the CME FedWatch Tool.

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However, the Greenback could regain its footing due to persistent inflation concerns from elevated energy costs and expectations of a Fed rate hike in December. Benchmark borrowing costs have seen dynamic moves, with 10- and 30-year US Treasury yields holding around 5.25% and 5.62%, respectively, after pulling back from multi-decade highs as fiscal and political instability in France sparked demand for safe-haven assets.

Despite that retreat, US Treasury yields remain near their highest levels since 2002. This positioning is supported by expectations of further Federal Reserve tightening, underlying resilience in the US economy, and mounting concerns over the nation’s long-term fiscal and debt trajectories.

Traders continue to monitor economic indicators for signals on monetary policy direction, with attention focused on upcoming Nonfarm Payrolls data. Economists project an addition of 90,000 jobs, a noticeable moderation from the previous month's 162,000, while the Unemployment Rate is expected to hold steady at 4.1%.

Switzerland’s robust Q2 data prompts only cautious optimism at Commerzbank

Analysts at Commerzbank note that “Switzerland’s second-quarter growth figures have caused quite a stir in recent weeks,” with the surprisingly strong 1.9% quarter-on-quarter expansion drawing significant attention. However, they stress that the performance was driven largely by net exports, particularly to the Euro area excluding Germany, rather than a broad-based domestic upswing. Given the inherent volatility of net exports, Commerzbank remains cautious, lifting its 2026 growth forecast only modestly to “2%” and expecting the SNB to stay focused on inflation dynamics rather than respond with immediate rate hikes.

SNB seen prioritising inflation anchor over swift policy response

Analysts at Commerzbank argue that the latest upside surprise in Swiss growth does not, in itself, warrant an immediate policy shift from the SNB. In their view, “the SNB thus does not need to react directly to the renewed strength in growth figures by hiking rates; it can focus on anchoring inflationary pressures within the middle of the target range for the time being,” suggesting the central bank will remain more attentive to its inflation mandate than to short-term fluctuations in activity.

Swiss Franc FAQs

What key factors drive the Swiss Franc?

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.

Why is the Swiss Franc considered a safe-haven currency?

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.

How do decisions of the Swiss National Bank impact the Swiss Franc?

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.

How does economic data influence the value of the Swiss Franc?

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.

How does the Eurozone monetary policy affect the Swiss Franc?

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.

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