The USD/CHF pair is losing ground after two days of gains, trading around 0.7880 during Asian business hours on Tuesday. The Swiss KOF index will be looked at later, which can provide future trends for overall economic activity.
The Swiss Franc (CHF) is likely to receive support from increased safe-haven demand, which can be attributed to the unstable situation between Ukraine and Russia. The Russian Foreign Minister said that Moscow’s negotiating position will change after the alleged attacks on President Vladimir Putin’s residence.
In addition, Saudi air strikes in Yemen and Iran’s declaration of a “full-scale war” with the US, Europe and Israel have raised fears of wider instability, with Trump warning of further strikes if Iran resumes rebuilding its nuclear programme.
USD/CHF is also facing challenges as the US dollar faces challenges amid continued expectations of two additional interest rate cuts by the Fed in 2026. The CME FedWatch tool shows an 83.9% probability of interest rates being held at the Fed’s January meeting, up from 80.1% the previous week. Meanwhile, the probability of a 25 basis point rate cut fell to 16.1% from 19.9% a week ago.
Traders are cautious ahead of the minutes of the December Federal Open Market Committee (FOMC) meeting scheduled for later today, which could provide insight into the Federal Reserve’s (Fed) outlook for 2026. Focus will shift towards US initial jobless claims data due on Wednesday.
Frequently asked questions about the Swiss franc
The Swiss Franc (CHF) is the official currency of Switzerland. It is among the top ten most traded currencies in the world, with its volume exceeding the size of the Swiss economy. Its value is determined by 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 suddenly removed, causing the value of the franc to rise by more than 20%, causing turmoil in the markets. Although the peg is no longer in effect, the fortunes of the Swiss franc tend to be highly correlated with the euro due to the high dependence of the Swiss economy on the neighboring eurozone.
The Swiss Franc (CHF) is a safe-haven asset, or the currency that investors tend to buy during times of market stress. This is due to Switzerland’s perceived status in the world: a stable economy, a strong export sector, large central bank reserves or a long-standing political stance towards neutrality in global conflicts, making the country’s currency a good choice for risk-averse investors. Turbulent times are likely to strengthen the value of the Swiss franc against other currencies that are seen as riskier to invest in.
The Swiss National Bank meets four times a year – once every three months, 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 expected to be above target in the foreseeable future, the bank will attempt to tame price growth by raising the interest rate. Higher interest rates are generally a positive for the Swiss Franc (CHF) because they lead to higher returns, making the country a more attractive place for investors. Conversely, low interest rates tend to weaken the Swiss franc.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can influence the valuation of the Swiss franc (CHF). The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or central bank currency reserves would lead to movements in the Swiss franc. In general, high economic growth, low unemployment and high confidence are good for the Swiss franc. Conversely, if economic data indicates weak momentum, the value of the Swiss franc is likely to decline.
As a small and open economy, Switzerland is highly dependent on the health of neighboring economies in the eurozone. The wider European Union is Switzerland’s main economic partner and a key political ally, so the stability of macroeconomic and monetary policy in the euro area is essential for Switzerland, and therefore for the Swiss franc (CHF). With such a dependence, some models suggest that the correlation between the fortunes of the euro (EUR) and the Swiss franc is over 90%, or close to perfect.
