The USD/CHF exchange rate has plunged to multi-month lows, driven by a powerful combination of US economic concerns and escalating trade tensions with Switzerland. The pair dropped to a low of 0.7928, marking a 14% decline from its year-to-date high and reaching its lowest level since late July.
Analysts from major banks are fueling the shift. Bank of America's Shusuke Yamada favors the Swiss franc as the best bet amid rising risk premiums for the US dollar and Japanese yen. Similarly, Goldman Sachs analysts point to political instability in Japan as supportive of the franc, which is increasingly viewed as a superior safe-haven asset. This sentiment is reflected in foreign exchange reserves, where allocations to the Swiss franc have risen to 0.76%, the highest level since 1992.
The US economic backdrop is a key driver. Weak jobs data, including a report showing only 22,000 jobs created and a rising unemployment rate of 4.3%, has heightened expectations that the Federal Reserve will cut interest rates. This has pressured the US Dollar Index (DXY). Furthermore, the US is grappling with stagflation—high inflation alongside slow growth—with upcoming CPI data expected to show headline inflation at 3%, moving further from the Fed's 2% target.
Trade war fears add another layer of pressure. The US has imposed new tariffs of 37% on most goods imported from Switzerland, with potential additional tariffs on medicines. This follows a failed diplomatic visit by Swiss President Karin Keller-Sutter to Washington. The tariffs threaten a vibrant trade relationship worth over $188 billion annually. President Donald Trump justified the move by citing trade deficits, despite Switzerland having abolished all industrial tariffs last year.
Switzerland's stability contrasts sharply with US turmoil. The franc's strength persists despite near-zero Swiss interest rates, bolstered by the country's political neutrality, economic stability, and lower public debt (37% of GDP) compared to the US's nearly $37 trillion national debt.
Technical analysis indicates the downtrend is strong, with the pair trading below key moving averages. The next major support levels are seen at 0.7870 and the psychological 0.7800 level.
