Insights 
VT 
The US Dollar maintains its position above 0.7900 against the Swiss Franc. A possible Sino-US trade agreement reduces risk aversion, lowering the demand for the Swiss Franc. Switzerland faces deflationary pressures, prompting the Swiss National Bank to consider rate cuts.
US Dollar Consolidation
The USD/CHF pair consolidates above 0.7980 as markets seek direction. The Dollar remains within a narrow range after ascending from 0.7910. Market participants are cautious, awaiting US CPI data and the Federal Reserve’s upcoming monetary policy decision.
Donald Trump and Chinese President Xi Jinping’s potential meeting to ease trade tensions helps calm markets. This development places additional pressure on safe-haven assets like the Swiss Franc.
Despite a moderate trade surplus improvement in Switzerland, the Franc struggles due to deflationary trends. These trends potentially prompt the SNB to implement negative interest rates.
The Swiss Franc’s value is influenced by Switzerland’s economy, SNB actions, and global market sentiment. It is a top ten traded currency with strong ties to the Euro due to the high dependency on the Eurozone economy. During market stress, the Swiss Franc is favoured for its stability and Switzerland’s neutral political stance.
Expectations of a Fed Rate Cut
We see the USD/CHF pair consolidating in a tight range, waiting for a clear signal from central banks. This suggests that options strategies betting on a significant price move, like long straddles, could be advantageous as we head into next week’s Fed decision. The market is pricing in uncertainty, and we should position for the volatility that will follow the release of US inflation data.
The expectation of a 25 basis point rate cut from the Fed next week is creating a ceiling for the US dollar. We saw this play out earlier in 2025 after weaker-than-expected Non-Farm Payrolls data, which has consistently shown a cooling labor market, with the latest report showing a gain of only 155,000 jobs. Therefore, buying puts on the USD or using bearish spreads could serve as a good hedge against any surprisingly dovish commentary from the Fed.
On the other side of the trade, the Swiss Franc is being undermined by deflationary pressures which we believe will force the Swiss National Bank’s hand. Switzerland’s latest Consumer Price Index reading came in at -0.2% year-over-year, marking the second consecutive month of negative inflation and reviving memories of the SNB’s dramatic policy shifts back in 2015. This makes call options on USD/CHF attractive, as a surprise rate cut by the SNB into deeper negative territory would likely cause a sharp upward move in the pair.
Broader market sentiment is a key factor, with positive news on the US-China trade front weakening the Swiss Franc’s traditional safe-haven appeal. We are seeing this reflected in the options market, where the 25-delta risk reversal for USD/CHF shows a persistent bias for calls over puts, indicating traders are positioning for more upside. If a trade deal materializes, the resulting risk-on mood would further pressure the Franc, making long USD/CHF positions a compelling trade.
