Fed Credibility Wobbles - Dollar Sinks as Euro Surges and Swiss Franc Hits Decade-High

Trump vs. Powell: Markets Sniff a Policy Tug-of-War

Reports that President Trump considered replacing Fed Chair Jerome Powell - and publicly called him “terrible” for not slashing rates - have shaken confidence in the Federal Reserve’s autonomy. Traders now assign a one-in-four chance of a July rate cut and are pricing roughly 64 basis points of easing by December, up from about 46 bp just days ago. The prospect of political interference makes the dollar look less like a dependable reserve anchor and more like a policy hostage.

Euro Nears a Four-Year Peak

While the greenback stumbles, the euro punched through 1.17 USD/EUR, its highest level since September 2021. The common currency’s advance narrows the gap with the franc, yet CHF strength still leaves Swiss salaries worth significantly more once exchanged into euros - an unplanned pay rise for cross-border commuters.

Franc vs. Yen: A New Safe-Haven Hierarchy

In overnight trading the franc even set a record against the yen around 180.55 CHF/JPY. The Japanese currency later clawed back ground, but the episode underscores how investors now rank CHF above even JPY when U.S. policy risk dominates headlines. With the Bank of Japan signalling “moderate” future hikes and caution over Trump-driven tariffs, sustained medium-term yen appreciation looks limited compared with franc momentum.

Tariff Countdown Adds Fuel to the Fire

July 9 marks the expiry of several “reciprocal tariff” suspensions between Washington and key partners, including the EU. JPMorgan now pegs the U.S. recession risk at 40 % if duties rise, warning that America’s phase of “exceptionalism” is ending. That narrative further erodes dollar appeal and channels capital into the euro - and even more so into the franc, whose deflationary backdrop makes rate cuts at the SNB unlikely in the near term.

What This Means for CHF-Earners Exchanging into EUR

A stronger franc versus both USD and JPY enhances its safe-haven reputation, supporting demand and keeping EUR/CHF subdued.

Each €1 000 converted at 0.94 costs roughly CHF 1 064 today, versus CHF 1 120 when the euro traded at 0.89 early last year - an annual saving of about CHF 700 on monthly 3 000 € transfers.

Forward-contract costs fall as U.S. yields sink; locking autumn tuition or mortgage payments in euros now requires a smaller premium.

Stay alert to sudden EUR strength: if Washington and Brussels avoid new tariffs, the euro could rebound above 0.95 CHF, trimming conversion gains.