USD/CHF fell below 0.7750 and traded near 0.7730 in early European hours on Wednesday, as the US Dollar weakened against the Swiss Franc after Donald Trump’s annual State of the Union address to Congress. Swiss Q4 GDP and the US January Producer Price Index (PPI) are due on Friday.
In his remarks, Trump referred to a “turnaround for the ages” and focused on lower inflation, as well as efforts to curb illegal immigration and fentanyl at the border. He said tariffs were “one of the main reasons” for the US economic change, and called a US Supreme Court ruling on tariffs “unfortunate”.
Tariff Policy Uncertainty
Trump also referred to new 15% global tariffs under section 122 of the Trade Act, calling them “a little more complicated” and saying they could lead to an outcome “even stronger than before”. Ongoing uncertainty around US tariff policy has weighed on the US Dollar.
Markets are also watching US–Iran tensions ahead of nuclear talks in Geneva on Thursday. The US embassy in Lebanon evacuated “dozens of its staff members” on Monday, and shifts in the dispute may affect demand for the Swiss Franc.
We recall this time last year, in late February 2025, when the dollar fell sharply following President Trump’s speech. The introduction of new global tariff ideas created significant uncertainty that weighed on the dollar. This pushed USD/CHF below the 0.7750 handle as traders sought the relative safety of the franc.
That tariff policy became a dominant theme for the rest of 2025, contributing to sustained dollar weakness and increased market volatility. The geopolitical tensions with Iran also lingered, providing a steady bid for safe-haven assets like the Swiss franc. We have seen this trend continue, with the pair now trading near a multi-year low of 0.7520.
Central Bank Expectations
Looking forward, the key divergence is between central bank expectations. January 2026 inflation data showed US core CPI holding firm at 2.9%, making it difficult for the Federal Reserve to consider easing policy. Conversely, recent Swiss inflation remains well below target at 1.3%, giving the Swiss National Bank (SNB) no reason to be aggressive.
We must always be mindful of the SNB’s tolerance for a strong franc, as they have historically intervened to weaken their currency. The SNB’s sight deposits, a proxy for currency intervention, showed a slight increase in the last reporting week, signaling that they are watching the current levels closely. Any sharp appreciation in the franc from here could trigger more forceful action.
Therefore, traders should consider strategies that benefit from a continued slow grind lower in USD/CHF, while protecting against a sudden reversal. Buying put options offers downside exposure, but a bear put spread may be more prudent. This strategy caps potential profit but significantly lowers the initial cost and defines risk should the SNB decide to step into the market.
