USD/CHF traded near 0.7980 in Asian hours, after rising by over 0.5% the previous day. Movement was limited, with Good Friday expected to keep trading quiet.
The US Dollar stayed firm against major peers as demand for safe-haven assets rose following threats towards Iran from US President Donald Trump. Trump gave no details on reopening the Strait of Hormuz, and referred to possible military action over the next two to three weeks.
Iran Response And Market Sensitivity
Iran’s Foreign Minister Abbas Araghchi said recent US strikes hit civilian infrastructure and would not force a retreat. He described the strikes as a sign of an opponent in disarray and moral decline.
Chicago Fed President Austan Goolsbee said higher oil prices could make it harder to bring down inflation. He warned that a rise in petrol costs could lift inflation expectations.
The Dallas Fed president backed keeping interest rates unchanged at the latest FOMC meeting. He said the labour market has stabilised since late 2025, while payroll growth remains weak and “uncomfortable.”
Swiss inflation rose to 0.3% year-on-year in March from 0.1%. It was below the 0.5% forecast and the highest in a year, with energy costs rising due to Middle East tensions.
Volatility And Positioning
With the US Dollar gaining strength from safe-haven demand, we are watching geopolitical developments closely. The current tensions in the Middle East are pushing WTI crude oil prices towards $95 a barrel, a level not seen in over a year. This feels similar to the situation we saw in late 2025 when threats over the Strait of Hormuz first spiked volatility.
These risks are being reflected in the options market, with the VIX volatility index now hovering around 18, up from 13 earlier in the year. For currency pairs like USD/CHF, this means traders are pricing in larger potential price swings over the next several weeks. This suggests buying options, like straddles, could be a prudent way to position for a sharp move in either direction without needing to be right on the direction itself.
The Federal Reserve appears to be in a difficult position, just as it was in late 2025. The most recent US Consumer Price Index (CPI) reading for March 2026 came in at 3.1%, stalling the disinflationary trend and pushing back expectations for a summer rate cut. This persistent inflation, fueled by energy costs, will likely keep the Fed on hold and support the dollar.
On the other side, the Swiss National Bank is facing a different reality, with its latest inflation figures at a more manageable 1.4% year-over-year. The SNB already cut its policy rate to 1.25% in March 2026, creating a clear policy divergence with the Federal Reserve. This fundamental difference should continue to put upward pressure on the USD/CHF pair.
Given this backdrop, we should consider long-dated call options on USD/CHF to capitalize on this divergence. This position benefits from both the fundamental strength of the dollar and any sharp upward move caused by escalating geopolitical risks. A break above the 0.8000 psychological level could open the door for a quicker move higher in the coming weeks.
