Swiss Franc Gains as Dollar Slides Despite Fed Chair Warsh’s Hawkish Remarks

The USD/CHF pair slipped to about 0.8090 during Asian trading on Monday, erasing modest gains from the previous session. The dollar came under pressure after Goldman Sachs chief economist Jan Hatzius signaled that the Federal Reserve is likely to keep rates unchanged in September, arguing that Chair Kevin Warsh’s hawkish remarks would only lead to a hike if August CPI and PPI data surprise positively—an outcome Goldman deems unlikely.

Warsh flags unfinished inflation work as financial conditions stay loose

Fed Chair Kevin Warsh delivered a markedly hawkish message, earning a Speechtracker score of 7.4/10, above the historical average of 6.5. He stressed that the Fed must be confident underlying inflation is trending toward the 2% PCE target, warning that “we have work to do” if not. Warsh also noted that financial conditions remain accommodative and credit markets show few signs of restraint, pointing to a bias for further tightening or a prolonged restrictive stance. His comment that recent summer inflation data does not yet signal a meaningful shift keeps focus on price‑stability risks, supporting the dollar while weighing on risk‑sensitive assets.

Markets have rapidly repriced odds ahead of the Fed’s September 15‑16 meeting. CME FedWatch now shows a roughly 57.5% probability of a 25‑basis‑point hike in September, up from about 35% before Warsh’s speech.

The Swiss National Bank kept its policy rate at 0% and expects to hold it through 2027. The SNB said it stands ready to intervene in forex markets to curb excessive franc strength. While most analysts anticipate a rate increase only in early 2028, market pricing hints at a possible hike as soon as March 2027, bolstering the franc’s appeal as a funding currency for carry trades.

Brown Brothers Harriman analysts project Swiss August inflation to stay modest, supporting the SNB’s decision to hold rates. BBH forecasts headline CPI at 0.5% year‑on‑year (June: 0.4%)—slightly below the SNB’s Q3 outlook of 0.6%—while core CPI is expected to hold at 0.3% y/y for a fifth consecutive month. They conclude that the SNB has ample room to keep its rate at 0.00% for the foreseeable future, which continues to weigh on the franc; the currency is currently the worst‑performing G10 peer this quarter.

Swiss Franc FAQs

The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.

The Swiss Franc (CHF) is considered a safe‑haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.

The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.

Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.

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