Swiss Franc Slips as U.S. Dollar Gains and Central Bank Signals Patience

Franc Weakens Amid Dollar Recovery

The Swiss Franc (CHF) continued its decline against the U.S. dollar on Tuesday, May 27, 2025, pressured by a strengthening dollar and remarks from Swiss National Bank (SNB) Governor Martin Schlegel. The USD/CHF pair rose to 0.8273, up from the previous session’s close of 0.8210, with the pair fluctuating between a low of 0.8188 and a high of 0.8280. The dollar’s rebound was bolstered by positive developments in U.S.-EU trade talks, easing tensions after last week’s threats from U.S. President Donald Trump to impose higher tariffs on European goods.

SNB Downplays Negative Inflation Concerns

Governor Schlegel indicated that while Swiss inflation could turn negative in the coming months, this would not necessarily prompt immediate action from the SNB. Speaking on Tuesday, he emphasized the bank’s focus on medium-term price stability over short-term monthly readings, stating that even negative inflation figures would not automatically trigger a policy response. Switzerland’s inflation rate dropped to 0.0% in April 2025, the lowest in four years and at the lower bound of the SNB’s target range for price stability, raising speculation about a potential rate cut at the bank’s June 29, 2025, meeting.

Rate Cut Expectations and Market Outlook

Market forecasts suggest a 25% chance of a 25-basis-point rate cut by the SNB, bringing the main rate to zero, and an equal probability of a 50-basis-point reduction to -0.25%. Schlegel’s comments underscored a cautious approach, prioritizing long-term price stability over reactive measures. Meanwhile, the dollar’s recovery was supported by news of extended U.S.-EU trade tariff reductions until July 9, 2025, alleviating some market concerns. The interplay of SNB policy signals and U.S. trade developments continues to drive USD/CHF movements, with investors eyeing the SNB’s next steps.