The Swiss Franc remained strong at around 0.90 per USD, hovering near its highest level since late December, as investors sought safer assets amid growing uncertainty over U.S. trade policies and geopolitical risks.
Swiss franc remains strong on Tuesday
The continued strength of the franc highlights its appeal as a haven currency, particularly as markets react to evolving global economic and political developments.
Investor concerns were heightened by President Trump’s unpredictable approach to tariffs, as unexpected delays and exemptions created uncertainty about the future of trade policy. Market participants remain wary of potential disruptions to global supply chains and economic activity, fueling demand for safe-haven assets like the Swiss franc. Meanwhile, the U.S. is pressing ahead with talks to end the war in Ukraine, but the exclusion of European and Ukrainian officials from negotiations has added to geopolitical tensions, raising concerns about the long-term stability of the region.
Switzerland’s inflation fell for the second consecutive month
On the economic front, Switzerland’s inflation fell for the second consecutive month, reaching just 0.4% in January—its lowest level in nearly four years. This marked the fifth straight month of inflation remaining below 1%, reinforcing fears that Switzerland could slip into deflation. Such a scenario would pose a challenge for the Swiss National Bank (SNB), which targets an inflation rate between 0% and 2% to ensure price stability.
However, underlying inflation trends presented a mixed picture. Core inflation, which strips out volatile items such as food and energy, unexpectedly increased, suggesting that some underlying price pressures remain. If this trend continues, it could indicate that inflationary risks are not entirely subdued, potentially reducing pressure on the SNB to take immediate action.
SNB moves under spotlight
The central bank is now facing a delicate balancing act. While lower inflation might justify further monetary easing, the resilience of core inflation, coupled with the Swiss franc’s persistent strength, complicates the outlook. A stronger franc makes Swiss exports more expensive, potentially weighing on economic growth, but it also helps contain imported inflation. Given these factors, the SNB may adopt a wait-and-see approach before making any adjustments to its policy stance.
Looking ahead, traders will closely monitor upcoming economic data releases, including GDP growth figures and inflation reports, for further clues on the SNB’s next move. Additionally, any shifts in global trade policy or geopolitical developments could further influence the franc’s trajectory and the broader economic landscape.
