USD/CHF is trading lower, around 0.7930, down 0.40% for the day. This decline comes as the market awaits the US GDP report for the third quarter and reflects uncertainty surrounding the Federal Reserve’s monetary policy.
Federal Reserve President Beth Hammack states that the current policy level is appropriate to pause and assess the impact of previous rate cuts. The CME FedWatch tool shows a 79% chance of rates remaining unchanged in January, while the likelihood of a rate cut has reduced.
Focus on Switzerland
Attention in Switzerland is on the December ZEW Economic Expectations survey. The Swiss National Bank has maintained a stable policy rate of 0%, believing inflation pressures are under control and suitable to support the economy.
The heat map shows the percentage change of the Swiss Franc against major currencies. The Swiss Franc is strongest against the US Dollar, with percentage changes noted for other currencies within the table, illustrating currency movements for the day.
Ghiles Guezout, a market analyst, authored this article, which contains market-focused content. The importance of thorough personal research before making investment decisions is emphasised, as the information is for informational purposes only and should not be considered a recommendation.
Given the Federal Reserve has already cut rates by 75 basis points, we see the US Dollar on a fragile footing. The upcoming US Gross Domestic Product release is a critical event that could reinforce this dollar weakness if the number comes in below the forecasted 2.1%. Derivative traders should consider positioning for a potential drop in USD/CHF, as a soft GDP figure would likely increase bets on further Fed easing in 2026.
Market Strategies
Our view is strengthened by recent inflation data, where US CPI last month was 3.1%, still well above the Fed’s target. In contrast, Switzerland’s inflation rate sits at a much lower 1.4%, giving the Swiss National Bank no reason to abandon its stable 0% policy rate. This stark policy divergence is a key factor supporting the franc against the dollar.
This environment seems well-suited for buying put options on the USD/CHF pair, which would profit from a continued decline. Using options allows us to define our risk to the premium paid, a prudent move given the holiday-thinned markets ahead. We can look at expiry dates in late January or February 2026 to capture any reaction to the Fed’s next meeting.
We are reminded of the market dynamics we observed back in late 2023 when initial signs of a Fed policy pivot caused a significant slide in the dollar. That period saw USD/CHF fall from above 0.91 to below 0.84 in just a few months. History suggests that once a Fed easing cycle is confirmed, the path of least resistance for the dollar is often lower.
In the immediate term, we will be watching tomorrow’s Swiss ZEW Economic Expectations survey very closely. A strong reading there would further cement the franc’s appeal as a stable currency backed by a cautious central bank. The SNB has made it clear it is comfortable with its current stance, creating a reliable anchor for the franc.
