USD/CHF declines due to Trump's tariff threat on the EU and rising risk aversion

• US Dollar weakness increases demand for the safe-haven Swiss Franc.
• USD/CHF extends losses after Trump threatens a 50% tariff on imports from the EU, which would be effective June 1st.
• The Swissie pair remains vulnerable as confidence in the Greenback as the reserve currency wanes.

The Swiss Franc (CHF) continues to strengthen against the US Dollar (USD) on Friday, with concerns over the health of the United States (US) economy weighing on the Greenback.

At the time of writing, USD/CHF is trading at 0.8224, down 0.81% in the day, and heading toward the May low of 0.8186, which is a key support level.

United States (US) President Donald Trump threatened a 50% tariff on imports from the European Union (EU) on Friday, which would be effective June 1st.  In a social media post, Trump stated that the EU was "very difficult to deal with" and "our negotiations with them are going nowhere."

Renewed tariff threats have reignited outflows from the US into safe havens like Gold and the Swiss Franc.

In the US, the House of Representatives' decision to pass the controversial 'one big beautiful bill' on Thursday has raised significant concerns over fiscal policy and debt repayments, underscoring the gravity of the situation. 

On social media, Trump stated, "This is arguably the most significant piece of Legislation that will ever be signed in the History of our Country!" 

However, the package is expected to add $3.8 trillion to the federal government's growing debt of $36.2 trillion over the next decade. This will increase the debt burden and is viewed negatively for the economy.

With speakers of the Federal Reserve (Fed) continuing to provide commentary about expectations of the US economy, their remarks play a pivotal role in shaping interest rate expectations. 

Although higher interest rates are generally supportive of a currency, a more uncertain economic backdrop continues to support demand for alternative assets.