USD/CHF dropped marginally during Friday’s Asian session, stabilising around 0.8180 after prior session gains. The US Dollar is experiencing a decrease amid concerns over US tariffs’ economic impact, with market activity subdued due to the Good Friday holiday.
Federal Reserve Chair Jerome Powell warned about the risk of stagflation, blending inflation with a slowing economy. The CME FedWatch Tool indicates markets expect around 86 basis points of rate cuts by late 2025, beginning in July.
Swiss Franc Strengthens
Swiss Franc (CHF) appreciated following positive Swiss Trade Balance data, with the surplus increasing to CHF 6.35 billion in March from CHF 4.80 billion in February. The CHF reached its strongest level against the USD since 2011 amid US-China trade tensions, increasing demand for the stable currency.
The Swiss Franc is noted for its stability, supported by Switzerland’s robust economy and political neutrality. The Swiss National Bank’s monetary policy decisions, macroeconomic data, and Switzerland’s economic ties to the Eurozone significantly affect the CHF’s value. Higher interest rates generally bolster the Franc, while economic instability may lead to depreciation.
What we’ve observed so far provides a foundation for interpreting how short-term direction might adjust over the coming weeks, particularly for those engaged in leveraged trades on currency pairs. The recent retreat in USD/CHF to settle near 0.8180 reflects a cooling off after a brief uptick, suggesting a phase of retracement or indecision, rather than a sharp reversal. Trading continues in thinner volumes, particularly around the Easter period, so movements during this time often exaggerate small shifts in sentiment rather than indicate lasting change.
Powell’s comments raised eyebrows
Powell’s comments raised eyebrows. The reference to stagflation — a rare blend of rising inflation accompanied by a slowing economy — can stir discomfort, as it implies that policy tools may struggle to manage both forces at once. It also implies that monetary responses are limited without triggering side effects such as suppressed demand or currency weakening. Based on the CME FedWatch data, market participants continue to price in roughly 86 basis points of cuts through late 2025, with the first anticipated in July. This aligns with the idea that tighter conditions may already be reaching their limit. However, the dollar’s direction will depend less on the specific timing and more on when the majority of participants begin adjusting expectations in unison.
We noticed the Swiss Franc gaining additional strength, following a solid improvement in the trade balance — now up to CHF 6.35 billion for March. This steady surplus highlights Switzerland’s competitive export position and provides another reason for the CHF to be favoured under risk-averse market conditions. The USD/CHF has not been this low since 2011, partly because tension around US tariffs is making safe havens more attractive as hedging instruments.
Jordan’s prior decisions at the Swiss National Bank continue to shape this upwards push in the Franc. Unlike other central banks taking aggressive action, the SNB has remained more cautious, often tightening policy only when there’s wider inflation traction or currency pressure. With positive trade metrics supporting the view that domestic fundamentals are solid, we expect the CHF to continue drawing strength unless energy costs or external demand shift abruptly.
For traders, it’s important to remain focused on inflation prints from both the US and Switzerland, and how these line up with central bank language. As medium-term rate expectations evolve, the rates differentials curve may steepen or flatten irregularly — and these distortions often create pricing anomalies in interest rate futures or forward FX contracts. Watch particularly for unexpected divergence in CPI releases or labour market statistics. In the past, similar spreads led to volatility spillovers across multiple FX crosses.
It’s also worth taking note of developments in broader geopolitical risks, which tend to amplify movements in safe-haven currencies like the CHF. Expect any announcements related to trade barriers or redirected capital flows to leave the USD somewhat exposed. Early signs of adjustments in export-led economies may trickle down to monetary settings, likely affecting skew behaviours in options markets or implied volatilities.
Given that we’re entering a stretch marked by policy uncertainty and trade friction, this creates room for directional trades when supported by cross-asset confirmation. Be wary, though, of positioning too heavily around seasonal lulls. Temporary price dislocations are more common now, particularly when driven by low conviction. Tools like risk reversals and open interest metrics may offer early signals of a broader shift, even before spot rates respond.
