US Tariff Cut, USD/CHF Falls to 0.79
The USD/CHF pair weakened and hovered around 0.7950 in Asian trading on Tuesday, after the Swiss Franc (CHF) strengthened following the signing of a new tariff agreement between Switzerland and the United States. Under the agreement, the US lowered tariffs on Switzerland to 15%, significantly lower than the 39% level during the Trump administration. This reduction is a welcome relief for Switzerland, which previously had the highest tariffs among developed countries.
The Swiss Franc's strengthening was also supported by expectations that the Swiss National Bank (SNB) would hold its policy interest rate at 0% in December, as inflation is projected to rise slightly. SNB Vice President Antoine Martin reiterated this view, stating that inflation is "expected to increase slightly." Meanwhile, USD/CHF briefly strengthened on Monday as the US dollar was boosted by declining expectations of a Fed rate cut in December. CME FedWatch Tool data now shows the market is pricing in only a 43% chance of a 25 bps cut, down from around 62% a week ago.
From a US monetary policy perspective, the emerging signals remain divided. Federal Reserve Vice Chairman Philip Jefferson believes that the risks to the labor market currently outweigh the risks of rising inflation, so the Fed needs to "proceed slowly" with its next interest rate cut. This means he is inclined to be cautious and does not want to be too aggressive in cutting interest rates in the near future.
In contrast, Fed Governor Christopher Waller stated that the US central bank should cut interest rates at its December meeting. He admitted to growing concerns about labor market conditions and the sharp slowdown in hiring. These differing views within the Fed have contributed to mixed sentiment towards the US dollar, with the current USD/CHF movement influenced by a combination of factors: falling US-Swiss rates, expectations of stable SNB policy, and the tug-of-war between dovish and hawkish narratives from Fed officials. (Asd)
Source: Newsmaker.id
