Insights 
VT 
USD/CHF is rising, trading near 0.7950, as the US Dollar strengthens due to diminishing expectations of a Fed rate cut in December. The CME FedWatch Tool shows a 46% chance of a 25-basis-point rate cut, down from 67% a week ago.
The anticipated delay in US economic data post-government reopening is causing uncertainty, with the September Nonfarm Payrolls report expected on November 20. Kansas City Fed President suggested monetary policy should limit demand growth, while the St. Louis Fed President highlighted the US economy’s resilience.
Swiss Franc Support
The Swiss Franc may find support if the Swiss National Bank (SNB) maintains its policy rate at 0% in December due to inflation concerns. The Swiss government’s tariff agreement with the US has also strengthened the Franc, providing relief from previous high tariffs.
The Swiss Franc, a top traded global currency, acts as a safe-haven asset due to Switzerland’s stable economy and political neutrality. Decisions by the Swiss National Bank, particularly during high inflation, can strengthen the Franc through rate increases. Economic data and neighboring Eurozone policy also significantly impact its value.
We are seeing the US Dollar strengthen as the market rethinks a December Federal Reserve rate cut, pushing USD/CHF toward 0.7950. The probability of a 25-basis-point cut has fallen to just 46%, a sharp drop from the 67% chance priced in only a week ago. This hawkish shift from Fed officials suggests that shorting the US Dollar carries significant risk right now.
A major focus for us is the delayed September Nonfarm Payrolls report, now set for November 20. Looking back, we saw how a surprisingly strong jobs report in October 2023, which added 336,000 jobs, caused a sharp rally in the dollar. A similar upside surprise this week would likely kill any remaining hopes for a December rate cut and could propel USD/CHF higher.
Potential Rate Decisions Impact
However, we believe the upside for USD/CHF may be limited because the Swiss National Bank is expected to hold its own policy rate firm at 0%. Swiss inflation, while low, has shown signs of ticking up recently, reinforcing the SNB’s cautious stance against premature easing. The new 15% tariff agreement with the US also removes a key uncertainty for the Swiss economy, lending underlying support to the franc.
Given the major event risk from the upcoming US jobs data, we see opportunities in the options market. Implied volatility is likely to increase heading into the November 20 announcement, making a long straddle a viable strategy. By purchasing both a call and a put option, we can position for a significant price move in either direction without needing to perfectly predict the outcome.
Looking further into December, the dynamic will be shaped by the policy decisions from both the Fed and the SNB. Unlike in mid-2024 when the SNB was cutting rates while the Fed held firm, we now see less policy divergence between the two central banks. This suggests the pair could become more range-bound, making strategies that benefit from low volatility, like selling an iron condor, potentially attractive after the central bank meetings are over.
