On Monday, the White House confirmed that US President Trump has signed an order to increase tariffs on imported goods from Asian countries to 20%, while tariffs on Mexico and Canada have not yet been implemented. Trump also warned that countries imposing tariffs on US goods from April 2nd will face equivalent tariffs.

In response, the Canadian government announced that if the US maintains its tariff policy, Canada will impose a retaliatory tariff of 25% on US goods starting from this Tuesday. The intensification of trade tensions has heightened market risk aversion, with funds flowing into traditional safe haven assets such as the Swiss franc.

The US dollar index rises, but safe haven demand limits the increase

Despite the US dollar index (DXY) climbing to 106.60, the US dollar still faces pressure. Recently, there has been an increase in optimism in the market about the possibility of Ukraine reaching a security agreement with the West. European leaders' statements on Ukraine providing security guarantees have boosted market risk appetite and weakened the safe haven appeal of the US dollar.

In addition, the US economic data is mixed. The ISM manufacturing PMI fell to 50.3 in February, lower than market expectations of 50.5 and lower than January's 50.9. On the contrary, the final value of the S&P Global Manufacturing PMI was raised to 52.7, higher than the initial value, indicating that some industries still maintain resilience.

Market Focus on Federal Reserve Policy Prospects and US Employment Data

The market focus has now shifted to the upcoming release of US employment data. The ADP employment report on Wednesday and the non farm payroll report on Friday will serve as important reference points for influencing the Federal Reserve's (Fed) interest rate policy.

If the data shows weakness, it will strengthen the expectation of the Federal Reserve cutting interest rates within the year, further suppressing the US dollar.

Market expectations suggest that if non farm payroll data falls short of expectations, it may prompt investors to increase their bets on the Federal Reserve's interest rate cuts this year, thereby enhancing the attractiveness of safe haven currencies such as the Swiss franc and continuing to put pressure on the US dollar/Swiss franc.

Editor's viewpoint:

Currently, the market is mainly affected by global trade policy uncertainty and Federal Reserve policy expectations. The Swiss franc, as a safe haven currency, usually performs strongly when trade tensions escalate, and we continue to monitor whether US non farm payroll data will further pressure the US dollar.