Insights 
VT 
The Swiss Franc (CHF) appreciated against the US Dollar (USD) following the release of the July Nonfarm Payrolls report. The USD/CHF pair saw a decline of nearly 1.0%, trading near 0.8045, as the US Dollar Index (DXY) dropped to 99.30 from a previous high of 100.26.
The US economy added 73,000 jobs in July, missing the expected 110,000 and marking the year’s weakest performance. Revised figures for June showed only 14,000 jobs added. The unemployment rate increased to 4.2%, while wage growth remained constant, with a 0.3% month-on-month increase and 3.9% year-on-year growth.
Mixed Manufacturing Figures
Manufacturing figures presented a mixed view, with S&P Global PMI slightly increasing to 49.8, but ISM PMI fell to 48.0, showing a continued slump. Consequently, the likelihood of a September rate cut soared to 82.1%, reflecting a change in expectations.
The announcement of new US tariffs on Swiss exports, totalling a 39% tariff, has raised concerns for Swiss sectors such as luxury watches and machinery. Switzerland’s economy relies on its strong export sector, predominantly oriented towards the EU. Despite being non-commodity exporters, Switzerland’s safe-haven status creates correlations with gold and oil prices.
Following today’s weak US jobs report, we see the Dollar taking a significant hit. The economy adding only 73,000 jobs is a clear sign of a slowdown, pushing the USD/CHF pair down towards the 0.8045 level. This is a sharp contrast to the job growth we saw throughout 2024, which consistently stayed above 150,000 per month.
This poor data has drastically shifted expectations for the Federal Reserve’s next move. The probability of a rate cut in September has now surged to over 82%, a stark reversal from the rate-hiking environment that ended in late 2023. We believe this cements a bearish outlook for the US Dollar for the coming weeks.
Rising Market Uncertainty
However, we cannot ignore the new headwind facing the Swiss Franc directly. The recently announced 39% US tariff targets key Swiss sectors, which are vital to their economy. Looking at 2024 trade data, Swiss exports of watches and machinery to the US alone were valued at over $15 billion, so this is a serious threat.
This creates a conflicting picture where the Dollar is weakening but the Franc’s fundamental export strength is being challenged. Such situations often lead to choppy price action and increased volatility, rather than a smooth, one-way trend. Implied volatility on USD/CHF options for the next month has already climbed by 20% in the last 24 hours, reflecting this market uncertainty.
Given this setup, we think buying options to play potential price swings is more prudent than taking a simple directional bet with futures. A long straddle, which involves buying both a call and a put option at the same strike price, could be an effective strategy. This position profits from a large price move in either direction, capitalizing on the expected volatility.
We also must remember the Franc’s traditional role as a safe haven, which tends to attract capital during global uncertainty, putting upward pressure on the currency. Historically, like during the European debt crisis over a decade ago, extreme CHF strength has prompted the Swiss National Bank to intervene to weaken it. This adds another layer of complexity and a potential for sharp, unexpected reversals.
