USD\/CHF moved up on Wednesday as the US Dollar firmed, putting pressure on the Swiss Franc. The pair traded near 0.7746 after rising from an intraday low of 0.7719.<\/p>\n
Traders reduced expectations for near-term Federal Reserve rate cuts due to ongoing inflation concerns. Chicago Fed President Austan Goolsbee said he is cautious about cutting rates early without clear evidence inflation is moving back towards the 2% target.<\/p>\n
Markets expect the Fed to keep rates unchanged at the March and April meetings, while pricing nearly 50 basis points of cuts by year-end. CME FedWatch shows the chance of a June cut at about 40%, down from about 50% a week ago, while July is priced at about 65%.<\/p>\n
In Switzerland, the ZEW Survey \u2013 Expectations index rose to 9.8 in February from -4.7 in the prior month. SNB Chairman Martin Schlegel said negative inflation for a few months is possible and expects inflation to rise in coming quarters, adding the SNB is ready to intervene in currency markets.<\/p>\n
No key US data is due on Wednesday, with focus on Fed comments later in the day. Attention then shifts to US PPI data and Switzerland\u2019s Q4 GDP report on Friday.<\/p>\n
Looking back to early 2025, we saw the market debating Federal Reserve policy when USD\/CHF was trading around the 0.7750 level. Now, with the pair holding firm near 0.8950, it is clear that the subsequent policy divergence has been the dominant theme. The Swiss National Bank’s decision to cut rates twice in late 2025, while the Fed held steady, has significantly widened the interest rate differential.<\/p>\n
The concerns about sticky inflation we saw from Fed officials in early 2025 proved prescient, as core inflation has remained stubbornly above target. With the latest January 2026 CPI data showing a 2.9% year-over-year increase, the Fed is expected to keep its policy rate in the 4.75-5.00% range for the foreseeable future. This contrasts sharply with market expectations a year ago, which were pricing in significant easing.<\/p>\n
On the other side, the SNB’s commentary last year about potential negative inflation was followed by decisive action to avoid a deflationary spiral. Swiss inflation is currently running at a muted 1.3%, giving the central bank no reason to reverse its policy rate from the current 1.00%. The SNB\u2019s readiness to intervene in currency markets, as mentioned last year, remains a key factor limiting franc strength.<\/p>\n
For derivative traders, this environment makes long USD\/CHF positions attractive simply for the positive carry. We should consider strategies that benefit from this, such as selling out-of-the-money CHF call options (equivalent to USD\/CHF put options) to collect premium while the rate differential works in our favor. The “structural headwinds” related to US trade policy, which were a concern in 2025, have materialized as ongoing tariff negotiations that create volatility, making premium-selling strategies even more appealing.<\/p>\n
In the coming weeks, we will be watching the next US Producer Price Index release for further signs of inflation persistence. Furthermore, Switzerland\u2019s final Q4 2025 GDP figures will be released next week, and a weak report would reinforce the SNB’s dovish stance. Any data reinforcing this policy divergence will likely provide further support for the pair.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" USD\/CHF rose as dollar strengthened; Fed cut hopes eased amid inflation; SNB cautious; focus shifts to data.<\/p>\n","protected":false},"author":62,"featured_media":16959,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-43620","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/43620","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/comments?post=43620"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/43620\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media\/16959"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=43620"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=43620"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=43620"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}