Is the USD seeing a turning point?

EUR/USD (07.07.2025: 1.17)

For the first time in four years, the euro exceeded the USD 1.17 mark in June. Since the low of EUR/USD 1.014 in February, the euro has been on a steep upward trend against the US dollar. Even during the escalation of the Middle East conflict in mid-June, there was little change.

More and more market participants are now talking about a structural change ("turning point") on the currency markets. In contrast to previous years, relative interest rate differentials are becoming less important, while capital flows are gaining in relevance. The financing of the US budget and the current account deficit are likely to remain market-determining factors. The suspected headwind for the US dollar - which is likely to persist for a while - is coming from various directions.

Conclusion: The trend will level out and we expect a sideways movement.

EUR/CHF (07.07.2025: 0.94)

A departure from zero and negative interest rates in Switzerland would not only have been premature, but also unwise. The SNB therefore lowered the key interest rate to 0% in June, as expected. As a result, most market participants in the swap market expect a return to negative interest rates, albeit at a less low level from 2015 to 2022.

Conclusion: We expect the Swiss franc to remain strong against the EUR.

USD/CHF (07.07.2025: 0.80)

The interest rate differential between the two currencies has widened even further and central banks are pursuing different directions. America is struggling to get its inflation down, while Switzerland has achieved the exact opposite. In addition, structural capital flows and geopolitical risk premiums are also influencing the depreciation of the USD against the CHF.

Conclusion: The trend will level out and we expect a sideways movement.

Mimi Haas, Lic.rer.pol. HSG, M.A. in Banking and Finance HSG, Partner

_{Sources: MarketMap and Bloomberg
As of 07.07.2025}