USD/CHF weakens to 0.9025 area amid rising trade tensions, modest USD weakness
20.02.2025, 05:40

USD/CHF weakens to 0.9025 area amid rising trade tensions, modest USD weakness

  • USD/CHF attracts some sellers and snaps a three-day winning streak amid renewed USD selling.
  • Trump’s fresh tariff threats weigh on the global risk sentiment and benefit the safe-haven CHF. 
  • The Fed’s hawkish outlook could act as a tailwind for the USD and help limit losses for the pair.

The USD/CHF pair meets with some supply during the Asian session on Thursday and for now, seems to have snapped a three-day winning streak to the weekly top, around the 0.9055 area touched the previous day. Spot prices currently trade near the lower end of the daily range, around the 0.9025 region, and seem vulnerable to sliding further.

US President Donald Trump said on Wednesday that he will announce tariffs on a number of products next month or even sooner. This fuels concerns about a global trade war and tempers investors' appetite for riskier assets, which is evident from a generally weaker tone around the equity markets and benefits traditional safe-haven currencies, including the Swiss Franc (CHF). Apart from this, the emergence of some US Dollar (USD) selling exerts downward pressure on the USD/CHF pair.

The global flight to safety triggers a fresh leg down in the US Treasury bond yields and to a larger extent, overshadows hawkish FOMC minutes released on Wednesday. This, in turn, fails to assist the USD Index (DXY), which tracks the Greenback against a basket of currencies, to build on its bounce from the vicinity of a two-month low tested earlier this week. That said, expectations for an extended pause on rates by the Federal Reserve (Fed) could support the buck and the USD/CHF pair. 

Hence, it will be prudent to wait for strong follow-through selling before confirming that the currency pair's recovery from the 0.8970-0.8965 horizontal support, or the year-to-date low has run out of steam. Traders now look forward to Thursday's US economic docket – featuring the release of the usual Weekly Initial Jobless Claims and the Philly Fed Manufacturing Index. Apart from this, speeches by influential FOMC members might influence the USD price dynamics and the USD/CHF pair.

Tariffs FAQs

Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

 

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