The US Dollar is getting stronger as investors feel more positive about the markets. Meanwhile, the Swiss Franc is losing value due to moderate risk preferences and significant US tariffs on Swiss imports. There’s hope for a US-China trade deal, which keeps the markets upbeat. However, caution remains as the US Consumer Price Index (CPI) report is coming up.

US Trade and Security Concerns

The US wants China to buy more American goods to fix the trade imbalance. China, on the other hand, is worried about security related to the H20 Nvidia chip. US consumer inflation numbers are in focus, with expectations for the headline CPI at 2.9% and core inflation at 3% year-on-year. These figures could affect policy decisions. The Swiss economy is under pressure from a 39% US tariff on its exports. As a country that relies heavily on exports, this creates a challenge for Switzerland’s economic performance, putting stress on the Swiss Franc. Switzerland has a strong economy, ranked high in GDP per capita, and boasts a solid services and export sector. The Swiss Franc usually tracks gold prices because of its safe-haven reputation, not typically driven by commodity exports.

Market Timing and Tactical Moves

The US Dollar is gaining strength, especially against the Swiss Franc, as optimism remains high. This upbeat mood decreases the appeal of safe-haven currencies, offering us a clear opportunity in the coming weeks. The upcoming US Consumer Price Index numbers are a key event. With core inflation expected around 3%, similar to late 2023 levels, the Federal Reserve will likely keep its tight policy. This prolonged higher interest rate approach should bolster the dollar. Given this scenario, we are preparing for a higher USD/CHF exchange rate, which is currently around 0.9400. Buying call options that expire in September or October 2025 looks like a smart move. This way, we can profit if the rate climbs to 0.9550 or higher while limiting our risks. The pressure on the Swiss Franc isn’t only from the US Dollar but also from domestic issues. The 39% US tariff is a significant hit to Switzerland’s key export sector, vital for its economy. Key exports such as pharmaceuticals and high-end machinery are at risk, threatening Swiss economic health. Additionally, the optimism about a possible US-China trade deal is leading traders to avoid traditional safe havens like the Swiss Franc. While this sentiment is positive, concerns about security issues like the H20 chip remind us of trade challenges faced in 2024. This situation suggests that investors may prefer the liquidity of the dollar over the safety of the franc. Historically, the Swiss Franc has weakened when its safe-haven status is overshadowed by stronger macroeconomic forces. Unlike the years 2021 to 2022 when geopolitical risks drove investors to the franc, current high US interest rates and tariffs present a strong case for its decline. Create your live VT Markets account and start trading now.

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