Insights 
VT 
USD/CHF reached a two-week high as the US Dollar strengthened. Federal Reserve Chair Jerome Powell noted that a December rate cut is not certain, causing traders to reduce expectations for further easing. Meanwhile, the Swiss Franc weakened due to the Swiss National Bank’s continued expansive policy stance.
The pair traded around 0.8026 as the Greenback gained following the Fed’s interest rate decision and optimism around a US-China trade agreement. The US Dollar Index rose to nearly 98.53, its highest in three months, due to renewed interest after the Fed took a cautious approach to rate cuts.
Fed’s Rate Decision and Market Reaction
The Fed delivered a second consecutive 25-basis-point rate cut, bringing the federal funds rate to 3.75%-4.00%, aligning with expectations. The decision saw dissent, with different preferences among members for deeper cuts or unchanged rates.
US-China relations improved as both countries agreed to a trade truce, with the US reducing tariffs and China promising to continue buying US soybeans. The Swiss National Bank’s Petra Tschudin stated expansive monetary policy would persist, suggesting interventions and negative rates remain options if inflation effects demand action.
The divergence in central bank policy described presents a clear opportunity for traders in the coming weeks. We are seeing a stark contrast between the Federal Reserve’s cautious tone and the Swiss National Bank’s readiness to ease policy further. This fundamental setup strongly favors continued US Dollar strength against the Swiss Franc.
Trading Strategies Amid Policy Divergence
Looking back, we saw a similar dynamic play out in late 2019 when a relatively hawkish Fed and dovish SNB propelled the USD higher. However, the situation today on October 31, 2025, is now inverted, with the SNB fighting persistent inflation while the Fed is signaling a potential peak in its hiking cycle. Swiss inflation was last reported at 2.2% year-over-year, compelling the SNB to maintain a hawkish stance, a complete reversal from its expansive policy years ago.
Given the current environment, we believe traders should consider strategies that benefit from a declining USD/CHF. The Fed’s latest dot plot suggests a pause in rate hikes, with markets now pricing in a 55% probability of a rate cut by the second quarter of 2026. This monetary policy divergence, favoring a stronger Franc, makes buying USD/CHF put options an attractive position to capitalize on potential downside.
A bear put spread could also be an effective strategy, as it would lower the upfront cost of the position while still profiting from a moderate decline in the currency pair. Current one-month implied volatility for USD/CHF is hovering around 6.5%, which is relatively low historically, making options strategies cheaper to implement. We anticipate this policy divergence will continue to weigh on the pair heading into the end of the year.
