The Swiss Franc (CHF) rose against the US Dollar (USD) after the release of the July Nonfarm Payrolls report. The USD/CHF pair dropped nearly 1.0%, trading around 0.8045, as the US Dollar Index (DXY) fell from 100.26 to 99.30. In July, the US economy added only 73,000 jobs, below the expected 110,000, marking the weakest performance of the year. Revised June figures showed just 14,000 jobs added. The unemployment rate went up to 4.2%, while wage growth stayed steady, increasing by 0.3% month-on-month and 3.9% year-on-year.

Mixed Manufacturing Figures

Manufacturing data was mixed. The S&P Global PMI slightly rose to 49.8, but ISM PMI dropped to 48.0, indicating a continued downturn. As a result, the chances of a rate cut in September jumped to 82.1%, signaling changing expectations. New US tariffs on Swiss exports, totaling 39%, have raised concerns for key Swiss sectors like luxury watches and machinery. Switzerland’s economy heavily relies on exports, especially to the EU. While not major commodity exporters, Switzerland’s reputation as a safe haven ties it closely to gold and oil prices. Today’s weak US employment report dealt a significant blow to the Dollar. The meager addition of 73,000 jobs suggests a slowdown, pulling the USD/CHF pair down towards 0.8045. This starkly contrasts with the job growth of over 150,000 per month throughout 2024. This disappointing data has dramatically changed expectations for the Federal Reserve’s next steps. The likelihood of a rate cut in September has surged to over 82%, a sharp shift from the rate hikes that were in place until late 2023. This reinforces a bearish outlook for the US Dollar in the upcoming weeks.

Rising Market Uncertainty

Nevertheless, we must consider the new challenge for the Swiss Franc. The announced 39% US tariff directly affects major Swiss sectors critical to the economy. In 2024, Swiss exports of watches and machinery to the US were valued at more than $15 billion, making this a significant threat. This creates a complex situation where the Dollar is weakening, but the Franc’s export strength is under pressure. Such circumstances can lead to volatility rather than a clear trend. Implied volatility on USD/CHF options has already increased by 20% in the last 24 hours, indicating market uncertainty. Given this environment, buying options to take advantage of potential price swings may be wiser than simply betting on direction with futures. A long straddle strategy, which involves purchasing both a call and a put option at the same strike price, could be effective here. This strategy benefits from large price movements in either direction, leveraging the anticipated volatility. We should also remember that the Franc often acts as a safe haven, drawing in capital during times of global uncertainty, which can push its value up. Historically, during crisis periods like the European debt crisis over a decade ago, significant CHF strength prompted the Swiss National Bank to intervene. This adds complexity and the possibility of sudden, sharp reversals. Create your live VT Markets account and start trading now.

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