The USD/CHF pair extended its rally to near 0.9165 during early European trading hours on Monday (3/2). The US dollar (USD) surged after US President Donald Trump's massive tariffs triggered a trade war.

The greenback strengthened by up to 0.60% against the Swiss franc (CHF), hitting a peak not seen since May 2024. The move came after Trump imposed 25% tariffs on imports from Mexico and Canada on Saturday, as well as new levies of 10% on Chinese products.

However, the Wall Street Journal reported on Monday, citing unnamed sources, that the Chinese government is preparing an opening offer to try to stave off larger tariff hikes and technology restrictions from the Trump administration, indicating that China is keen to start trade talks. Investors will be closely monitoring developments surrounding trade tariff policies. Any sign of a renewed trade war between the US and its trading partners could boost the US dollar against its rivals.

Data released by the US Bureau of Economic Analysis (BEA) reported on Friday showed that the Personal Consumption Expenditures (PCE) Price Index rose 2.6% YoY in December compared to 2.4% in November. This reading was in line with market consensus. Meanwhile, the core PCE Price Index, which excludes volatile food and energy prices, rose 2.8% YoY in December, matching the November reading and estimates.

The US inflation report suggested that the US Federal Reserve (Fed) may not be in a hurry to continue cutting interest rates, which supported the USD. Investors trimmed expectations for a rate cut from the Fed, with a 54% chance of two cuts this year and 44% for just one after the tariff news.

In Switzerland, the country's Real Retail Sales rose by 2.6% YoY in December compared to 1.4% (revised from 0.8%) previously, the Federal Statistical Office said on Friday. This reading was higher than the 0.6% expected.

Source: FXstreet