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USD/CHF trades lower around 0.7965 while Swiss producer inflation declines

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USD/CHF trades lower around 0.7965 while Swiss producer inflation declines

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update 2025.07.14 20:58
USD/CHF trades lower around 0.7965 while Swiss producer inflation declines

update 2025.07.14 20:58

  • USD/CHF trades lower to near 0.7965 as the US Dollar struggles to extend its upside.
  • An improvement in hopes of a US-EU trade agreement has capped the US Dollar's upside.
  • Swiss Producer and Import Prices decline for the second straight month.

The USD/CHF pair ticks down to near 0.7965 during the European trading session on Monday. The US Swiss Franc pair falls slightly as the US Dollar (USD) edges lower while struggling to extend its upside move amid hopes that the United States (US) and the European Union (EU) could strike a trade deal before the August 1 deadline.

The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, demonstrates sluggishness around 97.85.

Hopes of a potential trade agreement between the US and the EU have increased as President Donald Trump has confirmed that the 27-nations bloc is still in talks with Washington for reaching a deal.

Over the weekend, global trade worries rekindled after sending letters to the EU and Mexico, dictating 30% tariffs that will be separate from sectoral levies and warning that any retaliatory measures will be met by further increase in import duties.

Meanwhile, the Swiss Franc (CHF) remains broadly stable even though a decline in the Swiss Producer and Import Prices has prompted expectations that the Swiss National Bank (SNB) could push interest rates into a negative territory.

US Dollar FAQs

The US Dollar (USD) is the official currency of the United States of America, and the 'de facto' currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world's reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed's 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed's weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.


Date

Created

 : 2025.07.14

Update

Last updated

 : 2025.07.14

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