Insights 
VT 
US Officials and Chinese Representatives Meeting
The currency pair halted its three-day losing streak amid a stronger US Dollar as markets await the Fed’s decision. The Fed is expected to keep the benchmark rate at 4.25%–4.50% for a third consecutive meeting in 2025.
US officials are set to meet Chinese representatives, marking a high-level interaction since US tariff increases. China’s Ministry of Commerce confirmed their attendance, reflecting broader global trade dynamics.
While the USD remains firm, the Swiss Franc is supported by safe-haven flows reacting to US policy volatility. Nonetheless, it might face challenges with potential SNB rate cuts, and some analysts foresee a return to negative interest rates.
The SNB’s forex reserves fell for a third month in a row, reaching CHF 702.895 billion in April 2025. Meanwhile, Switzerland’s unemployment rate dropped to a four-month low of 2.8% in April, from 2.9% in previous months.
Shift in Sentiment for USD/CHF
As we’ve seen, USD/CHF lifting above 0.8250 reflects a shift in sentiment, driven primarily by expectations surrounding the Federal Reserve’s upcoming policy stance. With the general view that US interest rates will be held steady in the short term, demand for the greenback has picked up again, halting a recent wavelength of selling pressure. This stabilisation comes after three successive sessions of declines, and suggests traders are leaning into a narrative of relative US resilience, at least in comparison to peers.
The market has effectively priced in a 25 basis-point reduction from the Swiss National Bank in June – a move that stands in contrast to the Fed’s current pause. If that cut materialises, it would widen the interest rate gap between the two currencies. Such divergence is typically conducive to upward momentum in this pair, especially when foreign exchange markets are already gearing themselves for this outcome. We should, however, be noting how quickly consensus can shift in rate futures once data surprises recur.
Diving further into Swiss factors: the recent slip in the SNB’s foreign exchange reserves for a third straight month implies some moderation in intervention. It’s not a trivial figure either – April’s level fell to CHF 702.895 billion, which suggests that authorities may be less active in dampening franc strength via the reserves channel. That might alter how we think about support levels ahead, especially in the event of near-term policy adjustments.
While a lower unemployment reading – now at 2.8% – might typically offer some confidence regarding domestic strength, it hasn’t managed to offset broader bearish expectations for the franc. In fact, the drop from 2.9% represents an improvement, but it probably won’t carry enough forward momentum to counterbalance easier monetary settings. Notably, some corners of the market are weighing the possibility of a return to negative interest territory in Switzerland – a shift that, if it starts to crystalise in commentary or projections, could act as fuel for further upward movement in USD/CHF.
On the global front, high-level interactions between American and Chinese officials are emerging again, which may eventually feed back into broader risk sentiment. Although this doesn’t connect directly to the pair, it does affect the broader dollar tone and investor appetite for safety-linked currencies like the Swiss Franc. For now, we observe that while the franc continues to benefit from some haven flows – possibly reacting to US policy uncertainty – the trajectory is not one-directional, especially when juxtaposed with falling reserve levels and looming rate reductions.
From here, we’re watching for confirmation – not just in the SNB’s decision next month, but in any accompanying language on future guidance. Should the central bank begin laying out a longer path of accommodation, we might see renewed appetite for forward trades targeting higher levels in USD/CHF. The way the dollar holds against peers could reinforce this.
The job for positioning in this environment won’t be simply about reading central bank rate decisions – it’s increasingly about estimating how quickly expectations around them shift. That includes how traders respond to surprise Swiss data or statements that hint at a slowing of further rate cuts. Short-term instruments are particularly sensitive and will likely reflect even modest revisions in policy pathways.
