The USD/CHF exchange rate fell to approximately 0.7950 after a new tariff deal between the US and Switzerland. This agreement, which reduced tariffs to 15% from 39%, boosted the Swiss Franc, providing relief from previously high tariffs. Increased expectations for the Swiss National Bank to maintain its 0% policy rate in December further support the Swiss Franc.

Monetary Policy Influences

The probability of a 25 basis point Federal Reserve rate cut in December stands at 43%, according to the CME FedWatch Tool. Recent comments from Federal Reserve officials suggest varying views on rate cuts, with some prioritising labour market risks over inflation. The Swiss Franc’s value is greatly influenced by Switzerland’s economic health and the Swiss National Bank’s decisions.

The Swiss Franc is regarded as a safe-haven currency, benefiting from Switzerland’s stable economy and neutrality in global conflicts. Economic data, particularly related to inflation and growth, heavily impact its value. The Eurozone’s economic policies further influence the Swiss Franc, given Switzerland’s economic dependence on the region. As such, the fortunes of the Euro and the Swiss Franc are highly correlated.

Given the new US-Swiss tariff deal, we see the Swiss franc gaining significant fundamental support. This reduction from a punishing 39% rate to 15% is a major boost for Switzerland’s export-driven economy, which we know sent over $67 billion in goods to the U.S. in 2024 alone. This should provide a strong tailwind for the franc in the coming weeks.

The Swiss National Bank’s steady hand further strengthens our conviction in the franc. With recent Swiss inflation data for October 2025 coming in at 1.9%, the SNB’s decision to hold its policy rate at 0% is viewed as a hawkish stance, making the franc more attractive. We anticipate this policy stability will continue to underpin the currency’s value into the December SNB meeting.

Market Strategies

On the other side of the pair, the US dollar is facing uncertainty from a divided Federal Reserve. The recent U.S. Non-Farm Payrolls report showed a disappointing gain of only 95,000 jobs, validating concerns about a slowing labor market. This split between Fed officials on whether to cut rates in December introduces volatility that we can exploit.

For derivative traders, this environment suggests selling rallies in USD/CHF may be the prudent strategy. The conflicting Fed outlook is likely to increase implied volatility, making options strategies attractive. We should consider buying put options on USD/CHF to position for a continued move lower toward the 0.7800 level.

We must also remember how the SNB has acted in the past, such as when it abruptly removed the euro peg back in 2015, causing extreme market turmoil. While the current situation appears stable, this history reminds us to remain cautious and manage risk. This potential for sudden policy shifts means holding long-volatility positions could be beneficial.

Beyond this pair, the franc’s strength could also present opportunities against other currencies. With recent Eurozone manufacturing PMI figures for October 2025 remaining below the 50 mark, indicating contraction, we see potential in looking at short EUR/CHF positions. This would capitalize on the dual dynamics of a fundamentally strong Swiss economy and a struggling Eurozone.

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