Swiss Franc strengthens as USD stumbles on NFP shock
- USD/CHF drops nearly 1.0%, retreating from its highest level since June 23 amid a broad US Dollar sell-off.
- US NFP report disappoints, with the US economy adding only 73K jobs in July vs. 110K expected.
- September Fed interest rate cut odds surged to 82.1% following the NFP release, up sharply from 37% prior to the data.
The Swiss Franc (CHF) strengthens against the US Dollar (USD) on Friday as the Greenback comes under heavy pressure following the release of the July Nonfarm Payrolls (NFP) report. The softer-than-expected labor market data triggered a broad-based USD sell-off, helping USD/CHF retreat from multi-week highs.
At the time of writing, the USD/CHF is trading near 0.8045 during the American trading hours, down nearly 1.0%, as softer labor data boosts September interest rate cut bets. Meanwhile, the US Dollar Index (DXY), which tracks the value of the Greenback against a basket of six major currencies, fell sharply to 99.30 from a two-month high of 100.26 reached earlier in the day.
The latest employment data released by the US Bureau of Labor Statistics showed the economy added just 73,000 jobs in July, well below the expected 110,000, marking the weakest print this year. Adding to the disappointment, June’s figure was revised sharply lower to just 14,000 from 147,000 previously. The Unemployment Rate ticked up to 4.2%, in line with forecasts, while wage growth remained steady, with Average Hourly Earnings rising 0.3% MoM and 3.9% YoY.
In the manufacturing sector, the S&P Global Manufacturing PMI (Final) inched up to 49.8 in July, slightly above the 49.7 forecast and up from 49.5 previously. However, the more closely watched ISM Manufacturing PMI disappointed, falling to 48.0—well below expectations of 49.5 and down from 49.0 in June. The decline signals continued contraction in factory activity and highlights underlying weakness in the broader U.S. economy.
Following the weaker-than-expected jobs data, market expectations for a September rate cut surged to 82.1%, sharply up from just 37% earlier in the day, according to the CME FedWatch Tool. The dramatic repricing reflects growing confidence that the Federal Reserve may be forced to ease policy sooner than previously anticipated amid signs of labor market weakness.
On Thursday, US President Donald Trump signed an executive order that significantly reshapes US trade policy by introducing new "reciprocal" tariffs on more than five dozen countries. Switzerland is among the hardest hit, with exports to the U.S. now facing a steep 39% tariff, well above the previously threatened 31%. The order is set to take effect from August 7 and marks an escalation in Washington’s protectionist trade agenda, targeting Swiss sectors such as luxury watches, precision instruments, and machinery.
Speaking on Friday, Swiss President Keller-Sutter expressed deep concern over the newly imposed 39% tariff, calling it "very bad for the Swiss economy" and particularly damaging to key export sectors such as machinery and luxury watches. While pharmaceuticals remain exempt, she emphasized that the sudden hike far exceeds what was previously discussed, noting, "previous discussions had been very constructive. A 39% tariff is much higher than what was negotiated." Keller-Sutter added that Switzerland, which already maintains zero industrial tariffs and has pledged investments in the US, finds it “very difficult to offer more concessions.” She confirmed that Bern remains in contact with US counterparts and is seeking a diplomatic resolution to avoid further economic fallout.
Swiss economy FAQs
Switzerland is the ninth-largest economy measured by nominal Gross Domestic Product (GDP) in the European continent. Measured by GDP per capita – a broad measure of average living standards –, the country ranks among the highest in the world, meaning that it is one the richest countries globally. Switzerland tends to be in the top spots in global rankings about living standards, development indexes, competitiveness or innovation.
Switzerland is an open, free-market economy mainly based on the services sector. The Swiss economy has a strong export sector, and the neighboring European Union (EU) is its main trading partner. Switzerland is a leading exporter of watches and clocks, and hosts leading firms in the food, chemicals and pharmaceutical industries. The country is considered to be an international tax haven, with significantly low corporate and income tax rates compared with its European neighbors.
As a high-income country, the growth rate of the Swiss economy has diminished over the last decades. Still, its political and economic stability, its high education levels, top-tier firms in several industries and its tax-haven status have made it a preferred destination for foreign investment. This has generally benefited the Swiss Franc (CHF), which has historically kept relatively strong against its main currency peers. Generally, a good performance of the Swiss economy – based on high growth, low unemployment and stable prices – tends to appreciate CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
Switzerland isn’t a commodity exporter, so in general commodity prices aren’t a key driver of the Swiss Franc (CHF). However, there is a slight correlation with both Gold and Oil prices. With Gold, CHF’s status as a safe-haven and the fact that the currency used to be backed by the precious metal means that both assets tend to move in the same direction. With Oil, a paper released by the Swiss National Bank (SNB) suggests that the rise in Oil prices could negatively influence CHF valuation, as Switzerland is a net importer of fuel.