Insights 
VT 
Trade Tensions And Currency Trends
The US Dollar is under pressure due to increased trade tensions between the US and China, along with expectations of the Federal Reserve easing monetary policy. The Swiss Franc is strengthening on safe-haven demand despite weak local economic data. The USD/CHF falls for the fourth day, reaching a new one-month low before recovering slightly after comments from President Trump regarding the trade dispute.
The US Dollar Index falls to a one-week low, and markets expect two additional Fed rate cuts by the end of the year. This follows the Fed’s Beige Book report that points to declining consumer spending and a weakening job market. The ongoing government shutdown in the US adds further uncertainty and pressure on the Dollar, with the Senate rejecting a funding bill for the tenth time.
Trade relations between the US and China worsen, with President Trump threatening to increase tariffs on Chinese imports to 100% following China’s export restrictions on rare earths. Despite these threats, Trump expressed a willingness to achieve a fair deal with China. Meanwhile, safe-haven demand strengthens the Swiss Franc, which appreciates against major currencies despite poor domestic economic indicators, such as falling producer prices and modest GDP growth projections.
As of October 17, 2025, the US Dollar continues to show weakness while the Swiss Franc is gaining strength due to its safe-haven appeal. This trend is driven by expectations that the Federal Reserve will continue its monetary easing policy amid new geopolitical tensions. Derivative traders should be positioned for further downward movement in currency pairs like USD/CHF.
The Federal Reserve’s recent 25-basis-point rate cut has markets pricing in more easing, especially after this week’s Non-Farm Payrolls report missed expectations, coming in at a disappointing 95,000 jobs. The CME FedWatch Tool now shows a greater than 70% probability of another rate cut before the end of the year. Consequently, the US Dollar Index (DXY) has broken below the key 102.00 support level, signaling broad-based dollar weakness.
Safe Haven Demand For The Franc
We see a familiar pattern here, reminiscent of the US-China trade war back in the late 2010s. During that period, political uncertainty and tariff threats consistently pushed capital into safe-haven assets like the Franc. That historical precedent suggests the current tensions surrounding technology export controls could have a similar, sustained impact on currency markets.
Demand for the Swiss Franc is surging despite the Swiss National Bank’s own cautious stance and domestic data showing Swiss manufacturing PMI has contracted for a third straight month. This demonstrates that in times of global uncertainty, the Franc’s role as a refuge for capital often outweighs Switzerland’s own economic fundamentals. The Franc is currently the strongest performing G10 currency this month, appreciating over 1.5% against the US Dollar.
Given this environment, traders should consider buying put options on USD/CHF to capitalize on or hedge against further downside. A move toward the multi-year lows seen in late 2023, around the 0.8300 level, appears increasingly likely. Constructing a bear put spread could offer a cost-effective strategy to bet on a continued decline toward that target.
Market volatility is a critical factor, with the VIX index climbing to over 22 this past month, a level not sustained since the banking sector concerns back in 2023. This elevated implied volatility increases the cost of buying options but also presents opportunities for those selling premium. Strategies like selling out-of-the-money call options on USD/CHF could generate income while aligning with the bearish outlook.
