Swiss Franc Nears Breaking Point

Over the course of the last couple of months, the Swiss Franc (CHF) has strengthened significantly, a move largely driven by the response to rising market uncertainty. With the trade tariffs imposed by President Donald Trump changing, investors and market participants are looking to safe haven assets. 

That being the CHF.

The increase in demand for the CHF is creating potential challenges for the Swiss economy, giving way to the idea that the Swiss National Bank could possibly intervene to prevent the Swiss Franc’s strengthening too quickly. 

This for us FX traders could be a potential opportunity. 

Why is the Swiss Franc Strengthening?

Let’s unpack this a little, the recent CHF rally can be attributed to several key points, in particular the safe haven flows that have taken over the market due to the uncertainty provided by the US President Donald Trump. Safe haven currencies like the CHF and JPY have been the strongest currencies of the year.

In an unusual turn of events the US bond market and equities have been selling off in response to these trade tensions. Typically as bonds fall, yields rise and stocks fall. But not this time. This shows us that investors are leaving the USD, showing a lack of confidence in the US’s ability to pay back its debt. Arguably, the market and other foreign nations know that Trump will cave to bond market fluctuations and it can now be used as a tool to get the US President to negotiate. However, this leads to investors looking for safety and with the low interest rates in Switzerland, the CHF is an attractive option. 

Will the Swiss National Bank intervene?

The SNB has a long history of intervening in the currency markets, similar to the Bank of Japan (BoJ). The central bank hasn’t been shy about letting the markets know that they would intervene if the Swiss Franc gets too weak or too strong. 

The most notable intervention was in 2015, when the SNB abruptly removed its EUR/CHF floor, which sent shockwaves through the FX market and ballooned its balance sheet as a result.

During 2024 the SNB relied on interest rate changes to steer inflation, and this was reflected in the pricing of the CHF, which the market and the central bank deemed to be ‘fair value’. 

According to recent data, the annual inflation rate in Switzerland remained unchanged in March 2025 at 0.3%, below the forecasts of 0.5%. A stronger CHF could lead to deflation in Switzerland as it will increase costs for exporters. Deflation is not the goal for any central bank, if we see CPI fall into that category then the central bank may be left with little choice considering interest rates are already at 0.25%.

The central bank could lower interest rates further, going back into negative interest rates to prevent further flows into the Swiss Franc as it would charge those holding the currency. However if this tool is ignored by the markets then the SNB may have to intervene. In the past the central bank would buy foreign currencies and sell Swiss Francs, however this would increase their balance sheet which is already considered high. 

What does this mean for us FX retail traders?

For us mere mortals this could give us an opportunity as when things become ‘extreme’ we can often see significant reversals. I am not saying this is on my radar right now, as uncertainty remains. But this is something that we should be paying attention to. 

The Swiss National Bank Chairman is going to speak at the end of this week. It will be important for us to watch the language in the statement. How does the central bank feel about the current balance sheet and the unwavering strength of the Swiss Franc. 

EUR/CHF Outlook

EUR/CHF is trading towards the yearly lows despite the strength in the Euro. If we see talk of future intervention from the SNB then the EUR/CHF price could reverse from its lows of 0.9250. 

If buyers step back into this market then there’s a possibility of a retracement back to parity. But we have to remember that this move may not happen right away, it could be a while before we see the trade war situation calm down and for the SNB to cut rates to zero or into negative territory. 

USD/CHF Outlook

The price of USD/CHF has been trading significantly lower as the market's distrust in the USD grows. Today reports of a clash between US President Donald Trump and the Federal Reserve Chairman Jerome Powell has pushed the USD lower once again. 

If the price holds below this level then we could assume that the trend may not be over. However, if the price breaks minor resistance levels such as the current daily highs of 0.8270 then there could be a potential trend shift forming. 

I tried to look for a clue from the CoT reports, but although the Swiss Franc has strengthened significantly, hedge funds are not buying at extreme levels just yet. 

This tells me that the positioning is not getting to a pain point just yet. But we have to remain vigilant to the ongoing market changes and the upcoming speeches from the SNB chairman. If we can spot these changes early then there may be an opportunity for a reversal to the current rally. 

Let’s see what happens from here.