The USD/CHF pair has started to rise recently due to the growing expectations of fewer rate cuts by the US Federal Reserve next year. The Fed revised its 2025 projections to include only two rate cuts, down from the previously anticipated four. This shift in the Fed’s stance has led to a stronger US Dollar (USD), driving the USD/CHF pair higher.
Following the Christmas holiday, the USD/CHF pair has seen a recovery in its recent losses over the past two sessions. It is currently trading around 0.9000 during the European hours on Friday. The upside in the USD/CHF pair can be attributed to the stronger US Dollar (USD) as a result of the reduced expectations of rate cuts by the Federal Reserve.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major peers, is trading above 108.00, close to its highest level since November 2022. However, the upside in the Greenback could be limited as US Treasury bond yields remain subdued on Friday. At the same time, the Swiss Franc (CHF) may face depreciation as Swiss National Bank President Martin Schlegel suggested that interest rates in Switzerland might dip below zero.
The Swiss Franc (CHF) is considered a safe-haven asset by investors and is among the top ten most traded currencies globally. It is influenced by factors such as market sentiment, the country’s economic health, and actions taken by the Swiss National Bank (SNB). The SNB meets four times a year to decide on monetary policy, aiming for an annual inflation rate of less than 2%.
Macroeconomic data releases in Switzerland play a crucial role in assessing the state of the economy and impacting the Swiss Franc’s (CHF) valuation. The Swiss economy is stable, but any sudden changes in economic growth, inflation, or central bank reserves can affect the CHF. Additionally, Switzerland’s dependency on the neighboring Eurozone economies makes the CHF highly correlated with the Euro (EUR), with stability in the Eurozone essential for Switzerland and the CHF.
