The Swiss franc remains strong, with USD/CHF falling towards the 0.7880 level

Asian trading session, the USD/CHF currency pair came under pressure and declined, with quotes around 0.7880, giving up the gains from the previous two trading days. The Swiss franc (CHF) has been supported mainly due to rising global risk aversion sentiment. Recently, international tensions have escalated: the Russian Foreign Minister stated that Moscow will adjust its negotiation stance based on alleged attacks targeting President Putin’s residence. Meanwhile, Saudi Arabia’s airstrikes on Yemen and Iran’s claims of being in a “full-scale war” with the US, Europe, and Israel have heightened market concerns over geopolitical risks. The Trump administration also issued further warnings regarding Iran’s nuclear revival, which has further boosted demand for safe-haven assets.

Against this backdrop, as a traditional safe-haven currency, the Swiss franc has received buying support. Conversely, the US dollar (USD) faces headwinds due to market expectations of further rate cuts by the Federal Reserve in 2026. According to the latest data from CME FedWatch Tool, the probability of holding interest rates steady at the January Federal Open Market Committee (FOMC) meeting has risen to 83.9%, up from 80.1% a week earlier. Meanwhile, the probability of a 25 basis point rate cut has decreased from 19.9% to 16.1%.

Data Outlook and Trading Opportunities

The market’s focus is about to shift to the FOMC December meeting minutes, which are expected to reveal the Fed’s latest outlook for 2026. At the same time, the US initial jobless claims data will be released on Wednesday, which often has a significant impact on the dollar and risk assets. Before and after these data releases, USD/CHF may experience volatility.

Swiss Franc’s Safe-Haven Attributes and Market Position

As one of the top ten most traded currencies globally, the Swiss franc’s trading volume far exceeds the size of the Swiss economy. Its value mainly depends on overall market sentiment, Switzerland’s economic conditions, and the policy stance of the Swiss National Bank (SNB). During geopolitical turmoil or market panic, CHF often performs well, driven by market trust in Switzerland’s political neutrality, economic stability, and high central bank reserves.

Historically, from 2011 to 2015, the Swiss franc was pegged to the euro (EUR), but this link was suddenly broken, causing the franc to appreciate by over 20% and triggering market turmoil. Although the official peg no longer exists, due to Switzerland’s high dependence on the EU economy, the correlation between CHF and EUR remains strong, with a correlation coefficient often exceeding 90%. For investors considering 10,000 Swiss francs against the euro, this means that the economic trends in the Eurozone should also be closely monitored.

SNB Policy and Interest Rate Impact Mechanism

The Swiss National Bank holds four monetary policy meetings each year, aiming to keep the annual inflation rate below 2%. If inflation exceeds or risks exceeding this target, the SNB will raise the benchmark interest rate to curb price increases. Higher interest rates generally benefit the Swiss franc by increasing investment returns and attracting capital inflows; conversely, lower rates tend to weaken CHF.

Economic Data and Europe’s Dependency

Swiss macroeconomic data have a key influence on CHF valuation. While Switzerland’s overall economy is relatively stable, any sharp changes in economic growth, inflation, trade balance, or central bank reserves can trigger franc volatility. Generally, strong economic growth, low unemployment, and high consumer confidence support CHF appreciation. Conversely, if economic data deteriorate, the franc will face depreciation pressures.

As an open small economy, Switzerland is deeply dependent on the health of neighboring Eurozone economies. The EU, as Switzerland’s main economic partner and political ally, makes its macroeconomic and monetary policy stability crucial for Switzerland and its currency. Therefore, when analyzing USD/CHF trends, investors should not only focus on US economic data and Fed policies but also closely monitor European economic developments.