Insights 
VT 
The USD/CHF pair corrects to near 0.8000 as the US Dollar retreats from its monthly high of 0.8030. The FOMC minutes indicate more interest rate cuts by the Federal Reserve this year, suggesting that the Federal Fund Rate could fall to 3.6% by year-end.
The US Dollar Index trades 0.1% lower at around 98.70, having reached near 99.00 recently. This comes amid a political crisis in France, affecting dollar strength.
Traders Confidence In Upcoming Rate Cuts
Traders, as per the CME FedWatch tool, are confident in another rate cut at the next Federal Reserve meeting and see a 78.6% chance of another by December. Fed Chair Jerome Powell’s upcoming speech at the Community Bank Conference will be of interest.
In Switzerland, there’s caution over whether the Swiss National Bank will go for negative interest rates. Concerns about inflation and negative rates’ impact on pensioners and financial institutions have been voiced by SNB Chairman Martin Schlegel.
The US Dollar, the primary global reserve currency, is heavily influenced by the Federal Reserve’s monetary policies. Changes in interest rates and quantitative measures like easing or tightening significantly impact the dollar’s value. These skews either support or diminish USD strength depending on economic conditions.
The Federal Reserve’s recent minutes confirm our view that more interest rate cuts are coming in 2025, likely starting later this month. This policy of loosening contrasts with the Swiss National Bank, which appears hesitant to follow a similar path into negative rates. This growing divergence between the two central banks should put continued downward pressure on the USD/CHF pair.
Diverging Monetary Policies Of The Fed And SNB
This dovish Fed stance is justified by recent economic figures we have seen. September’s Non-Farm Payrolls report, released last week, showed hiring slowed to 150,000, well below consensus estimates and marking the second straight month of weakness. This, along with the latest core PCE inflation data dipping to a yearly rate of 2.8%, gives the Fed ample reason to cut.
In Switzerland, however, inflation has remained surprisingly sticky, with the latest reading for September holding at 1.8%, which is firmly within the SNB’s target band. This gives Chairman Schlegel justification for his recent warnings against the negative consequences of cutting rates further. This provides a solid fundamental support for the Franc that we cannot ignore.
For derivative traders, this environment makes buying USD/CHF puts with November and December 2025 expiries an attractive strategy. With the Fed’s path now more clearly telegraphed, implied volatility may remain contained, offering a cost-effective way to position for a potential break below the 0.8000 level. We are looking for a move towards the 0.7900 support area in the coming weeks.
We’ve seen this playbook before when looking back at the Fed’s pivot to easing in 2019, which led to a sustained period of dollar weakness against major currencies. The current combination of slowing US employment data and cooling inflation is echoing that period. History suggests that once the first cut is delivered, the momentum for the dollar is typically downwards.
The latest Commitment of Traders (CFTC) report also supports this view, showing that leveraged funds have increased their net short positions against the US Dollar for the third consecutive week. This tells us that larger market participants are already positioning for further dollar weakness. It seems the path of least resistance for USD/CHF is to the downside.
