Insights 
VT 
The USD/CHF currency pair has dipped to around 0.7950 due to escalating US-China trade tensions. This decline comes amid market expectations for further Federal Reserve rate cuts by the end of the year. Tensions are heightened following US President Donald Trump’s declaration of a “full-blown trade war” with China, with threats of 100% tariffs on Chinese imports. Despite these tensions, a potential meeting between Trump and Chinese President Xi Jinping may offer hope for an extended trade truce.
In monetary policy, a 97% chance of a 25-basis-point rate cut at the Federal Reserve’s October meeting is predicted, with a more than 93% chance of another cut in December. The ongoing US government shutdown continues to cast a shadow over economic confidence, risking the loss of over 10,000 federal jobs.
Swiss Economic Outlook
In Switzerland, SECO has adjusted its growth forecasts, maintaining a 2025 GDP forecast at 1.3%, but reducing 2026’s to 0.9%. Inflation is expected to remain subdued, indicating that SNB may maintain a cautious stance. The Swiss Franc shows strength against the Australian Dollar, as seen in percentage changes against major currencies.
The market is clearly betting on a weaker US Dollar for the rest of the year. With a 97% probability of a rate cut this month and another highly likely in December, we see selling USD rallies as the primary strategy. This is a significant policy reversal from the aggressive rate-hiking cycle we saw throughout 2022 and 2023.
For USD/CHF, this outlook suggests that buying puts or establishing bear put spreads could be a sound strategy to capitalize on further downside. The ongoing US-China trade tensions and the government shutdown are keeping market uncertainty elevated, as seen with the CBOE Volatility Index (VIX) recently trading above 20. This sustained fear provides a strong tailwind for the Swiss Franc’s safe-haven appeal, despite its own economic challenges.
Swiss National Bank Policy
We must also consider that the Swiss National Bank is in a cautious position, given the weak growth forecasts for 2026. Data from the Swiss government shows inflation has remained below 2% for over a year, giving the central bank no reason to tighten policy. This makes the current dynamic less about Swiss strength and more about a widespread US Dollar weakness.
Traders should watch the recent low of 0.7933 as a critical level; a break below could open the door to testing lows not seen since early 2015. However, the latest US jobs report, which showed the addition of 160,000 jobs in September, could give the Fed a reason to use more cautious language, potentially creating short-term bounces in the dollar. We would view any such strength as an opportunity to enter new short positions at better levels.
