The Swiss franc strengthened on Friday as a global stock market selloff pushed investors toward safe-haven assets. At the same time, the British pound slipped after reports that the upcoming UK budget will not include income tax increases.
Risk sentiment weakened as expectations grew that the Federal Reserve may keep interest rates unchanged in December instead of continuing with rate cuts. Several Fed officials signaled caution on Thursday, pointing to persistent inflation pressures. Markets are now pricing in a 50% chance of a 25-basis-point cut next month.
Kansas City Fed President Jeffrey Schmid said on Friday that his concerns about overheating inflation extend far beyond the impact of tariffs. His comments suggested he may again dissent at the December meeting if policymakers move to cut short-term rates.
Traders are also preparing for a wave of economic data that was delayed during the U.S. government shutdown. Some of the upcoming reports are expected to contain gaps for October, when data collection was halted. Lou Brien, strategist at DRW Trading, said markets remain unsettled due to the lack of data and heavy focus on Fed commentary.
The Bureau of Economic Analysis announced on Friday that it is working to update the schedule for delayed economic releases. If upcoming data shows further weakness in the labor market, analysts expect the U.S. dollar could return to its downward trend from earlier in the year as markets adjust their expectations for future rate cuts.
Safety in Switzerland
The euro fell 0.2% and touched 0.9177 Swiss francs, its lowest level since the extreme volatility seen in 2015 when Switzerland removed its currency cap. The U.S. dollar also slipped 0.04% to 0.793 francs.
In other developments, Switzerland said the United States will sharply reduce tariffs on Swiss goods to 15% from the previous rate of 39% under a new trade agreement framework.
The Japanese yen rose 0.14% to 154.31 per dollar but remained close to the nine-month low it hit earlier in the week. Meanwhile, the euro dipped 0.11% to $1.1618.
Normally, rising U.S. yields and declining equities would prompt investors to move into the dollar. However, earlier this year, during market turmoil triggered by President Donald Trump’s tariff announcements, the dollar weakened alongside stocks and bonds. Jane Foley, head of FX strategy at Rabobank, said this week’s moves reflect heavy position adjustments, making it difficult to gauge typical market reactions.
UK Turmoil
The pound fell sharply against both the dollar and the euro after reports that Prime Minister Keir Starmer and Finance Minister Rachel Reeves have dropped plans to increase income tax rates. The decision marks a major shift only weeks before the November 26 budget.
The pound was last down 0.33% at $1.3146. The euro also reached its strongest level against the pound since April 2023.
In cryptocurrency markets, bitcoin also declined in the broader risk-off environment. It dropped 2.55% to $96,286, marking its lowest level since May.
