Insights 
VT 
USD/CHF has risen, trading around 0.8070, up 0.35% after hitting a recent high. This performance is due to the Swiss Franc’s weakness from softer inflation data, supporting USD momentum.
The Swiss CPI fell by 0.3% in October, more than the predicted 0.1% decline. Annually, prices rose 0.1%, falling short of the 0.3% expected increase and remaining near the Swiss National Bank’s target range.
Swiss Bank Monetary Policy
Market expectations for a rate cut to -0.25% within a year rose to 70%. The SNB is open to negative rates if economic conditions worsen.
The USD benefits from the US’s monetary policy divergence after the Fed’s recent rate adjustment. Despite US factory data contraction, inflationary pressures remain in certain sectors.
The S&P Global Manufacturing PMI indicates continued growth, while ISM PMI reflects ongoing contraction. The USD/CHF remains strong above 0.8050, benefiting from Swiss inflation issues.
Swiss Franc showed varied performance against major currencies, being strongest against the Canadian Dollar. For instance, CHF has a -0.31% change against the USD.
US And Swiss Economic Outlook
Information is for informational purposes and should not be seen as investment advice. Comprehensive independent research is recommended before investing in open markets.
The clear divergence between the US Federal Reserve and the Swiss National Bank (SNB) is the main story here. With Swiss inflation falling to just 0.1% in October, the SNB is being pushed toward cutting interest rates further, possibly back into negative territory. This policy path strongly favors a higher USD/CHF exchange rate in the coming weeks.
We just saw the US jobs report for October, which showed a solid 210,000 jobs were added, beating expectations and keeping wage growth firm. This data gives the Fed room to hold rates steady, reinforcing the interest rate advantage of the US dollar. The contrast couldn’t be starker with Switzerland’s economy, where weak inflation is the primary concern.
Looking back, we remember the period from 2015 to 2022 when the SNB held rates negative to weaken the franc, so their willingness to act is not in question. Current market pricing gives a 70% probability of a rate cut within the year, reflecting a strong belief that the SNB will move to devalue its currency. This creates a compelling case for positioning for further Swiss Franc weakness.
For derivative traders, buying call options on USD/CHF seems like a prudent strategy to capture potential upside with defined risk. We should consider options with strike prices above the current level, perhaps around 0.8150 or 0.8200, with expirations in December 2025 or January 2026. This allows us to profit from the expected upward trend driven by monetary policy.
However, we must remain aware of the Swiss Franc’s role as a safe-haven asset. Any unexpected global economic turmoil or increase in geopolitical risk could cause a rapid flight to safety, strengthening the franc and reversing the current trend. Therefore, managing position size is crucial to mitigate the impact of any sudden market shocks.
