USD/CHF fell to about 0.7890 in early European trading on Wednesday, after reports of a possible two-week ceasefire between the US and Iran weakened the US Dollar against the Swiss Franc.
US President Donald Trump posted that Tuesday was “a big day for world peace” and said the US would help with traffic in the Strait of Hormuz. He said he would suspend attacks if Tehran agreed to fully reopen the Strait, after Iran accepted a two-week ceasefire.
Ceasefire Updates And Market Reaction
Iranian Foreign Minister Seyed Abbas Araghchi said Iran’s military would coordinate passage through the Strait of Hormuz during the ceasefire. US–Iran talks are due in Islamabad, Pakistan, on Friday to finalise details.
The minutes from the Federal Reserve’s March meeting are due on Wednesday and may shed light on officials’ views of the recent energy shock linked to Middle East conflict. More hawkish comments could support the US Dollar in the near term.
In Switzerland, inflation rose in March to its fastest pace in a year, driven by higher heating oil costs linked to an energy supply squeeze from the war in the Middle East. This has eased pressure on the SNB to move back to negative interest rates.
We recall the sharp drop in USD/CHF below 0.7900 in early April 2025 following the surprise US-Iran ceasefire announcement. This memory is important as currency volatility, measured by the CVIX index, has recently fallen to a two-year low of just 5.8. Such low volatility suggests the market is complacent and unprepared for a similar shock.
Options Strategies In A Low Volatility Regime
With implied volatility so low, options are cheap. Traders should consider buying straddles or strangles on USD/CHF, which profit from a large move in either direction. This strategy acts as insurance against a sudden geopolitical flare-up or a surprise central bank announcement.
That 2025 de-escalation briefly calmed oil markets, but we remember it followed a period of high energy costs that pushed Swiss inflation up. Now, with Swiss CPI for March 2026 coming in at a mild 1.1%, the Swiss National Bank has more freedom to cut rates than the Fed. This divergence suggests renewed weakness for the Franc if risk sentiment remains stable.
We also watched the Fed minutes closely in 2025 for hawkish signals. Currently in April 2026, Fed funds futures are pricing in nearly 75 basis points of cuts by year-end, yet recent US labor data remains strong. Any hint from the Fed that they are less eager to cut than the market expects could cause a sharp repricing and send the USD higher against the CHF.
Given the low cost of options and the potential for the Fed to disappoint rate cut expectations, a bullish risk reversal or a simple call spread on USD/CHF looks attractive. This position would profit from a rebound in the pair over the coming weeks. It offers a defined-risk way to position for a stronger dollar if geopolitical calm holds and Fed policy becomes the main driver.
