The USD/CHF exchange rate has dropped significantly as the US Dollar index fell to its lowest point in months, prompting traders to flock to the safety of the Swiss Franc.
On Friday, it fell to a low of 0.8750, its lowest level since November of the previous year, marking a 4.3% decline from its peak earlier this year.
The Swiss Franc has strengthened against the Dollar and other currencies due to its safe-haven status, a role that has gained importance in recent weeks due to the actions of Donald Trump, which have unsettled the business community.
Indeed, the currency reached a three-month high of 0.87665 per Dollar at the time of writing on Monday.
Trump has imposed substantial tariffs on major US trading partners, including Canada, Mexico, and China. These tariffs pose a risk of pushing the global economy into a recession this year, as logistical challenges continue to increase.
The Swiss Franc is frequently regarded as a safe-haven asset due to Switzerland's neutrality on major global issues. Additionally, Switzerland is one of the strongest economies in Europe, with its trade surplus continuing to rise.
The USD/CHF exchange rate also dropped after Switzerland released low inflation data. According to the country's statistics agency, Swiss inflation fell to its lowest level in four years.
The headline CPI increased by 0.3% in February, supported by lower import costs as the Swiss Franc strengthened. These figures suggest that the Swiss National Bank (SNB) may need to lower interest rates further later this year.
Some analysts are concerned that the SNB might even resort to negative interest rates to devalue the currency, as the bank prefers a weaker Franc to help manufacturers sell their products more competitively in Europe.
The market now expects the SNB to reduce rates from 0.50% to 0.25% at its next meeting this month, with the possibility of bringing them down to zero by June.
The next major catalyst for the USD/CHF pair will be the upcoming US consumer inflation data, set to be released on 11th March.
Economists anticipate that the latest data will show a decrease in headline consumer inflation, dropping from 0.5% in January to 0.3% in February on a year-over-year basis. Core inflation is expected to remain steady at 3.3%.
Most economists predict that US inflation will continue to rise in the coming months, driven by the imposition of tariffs on key goods.
These expectations have led many analysts to forecast that the Federal Reserve will reduce interest rates three times later this year.