USD/CHF stayed muted for a second day, changing hands near 0.8070 in Asian trading on Thursday as the US Dollar came under pressure after Wednesday’s Federal Reserve meeting minutes. The record from Kevin Warsh’s first FOMC meeting as chair on 16–17 June showed a divided committee: many participants saw the benchmark rate ending the year unchanged or slightly below its current 3.6% level, while others argued rates would need to rise by year-end.
Rate expectations have shifted as the CME FedWatch tool showed swap traders lifting the implied chance of a hike at the next Fed meeting to over 30%, up from less than 20% last week. At the same time, renewed US–Iran tensions have supported safe-haven flows, with Iranian Parliament speaker Mohammad Bagher Ghalibaf saying that two days of fresh US strikes would be met with retaliation and that Iran controls access to the Strait of Hormuz. The Swiss Franc drew support from risk demand even as the SNB restated its readiness to intervene in FX markets “if necessary” to limit excessive CHF strength and contain imported inflation.
Federal Reserve Division and Market Volatility
We see the split at the Federal Reserve as a clear signal that volatility is set to increase in the coming weeks. With policymakers so divided on the path for interest rates, any incoming inflation or employment data will cause significant market swings. This makes long volatility strategies using options, such as straddles on major currency pairs, an attractive way to position for the uncertainty ahead.
Geopolitical Tensions and USD/CHF Outlook
The renewed geopolitical friction with Iran over the Strait of Hormuz is a distinctly inflationary risk that we believe markets are under-appreciating. We have already seen the price of Brent crude oil climb 5% this week to over $95 a barrel, a level not seen since late 2025. This surge in energy costs will force the Fed’s hand, making the hawkish members more vocal and pushing the odds of a rate hike well above the current 30% pricing.
While both the US Dollar and Swiss Franc are acting as safe havens, we anticipate the dollar will ultimately win this tug-of-war. The Swiss National Bank’s explicit threat to intervene to weaken the Franc acts as a ceiling on its strength, a policy reminiscent of its actions during the European sovereign debt crisis. In contrast, the US Dollar benefits from both safe-haven flows and the prospect of higher interest rates, giving it a dual tailwind.
Given this backdrop, we are positioning for a notable move higher in USD/CHF from its current 0.8070 level. We are looking at derivatives that profit from this upward move, specifically buying call options with an August expiry and a strike price around 0.8200. This provides a cost-effective way to capture upside if the dollar strengthens as we expect.
