Insights 
VT 
USD/CHF Performance and Monetary Policy Outlook
Fed Chair Jerome Powell’s remarks against a December interest rate cut help mitigate economic concerns related to the US government shutdown. The Swiss Franc is under pressure with predictions that the Swiss National Bank (SNB) might reduce interest rates into negative territory.
The divergence in monetary outlooks between the Fed and SNB contributes to the USD’s strength against the CHF. Softer inflation data in Switzerland fuels expectations of SNB rate cuts, impacting the Franc.
This week, no major economic data from the US is expected due to the government shutdown. However, comments from FOMC members could influence the market’s trajectory. Additionally, the risk sentiment in broader financial markets may also create temporary trading opportunities for USD/CHF.
Analysis of Current Trends and Future Expectations
Based on the current momentum, we see a clear divergence between US and Swiss monetary policy, which is pushing the USD/CHF pair higher. The primary driver is the US Federal Reserve’s firm stance against further rate cuts, contrasting sharply with expectations that the Swiss National Bank may ease policy. For the coming weeks, the path of least resistance for the pair appears to be upward, targeting a sustained break above the 0.8100 level.
To add credibility to this view, recent data from late October 2025 showed US Core CPI holding firm at 3.4% year-over-year, reinforcing the Fed’s “higher for longer” narrative. In contrast, Switzerland’s latest inflation print came in at a subdued 1.2%, giving the SNB ample reason to consider a rate cut at its next meeting in December. This growing policy gap is the fundamental force behind the dollar’s strength against the franc.
For derivative traders, this environment suggests buying call options on USD/CHF could be a prudent strategy. A call option with a strike price at or slightly above 0.8100, perhaps with a December 2025 or January 2026 expiration, would allow traders to capitalize on continued upward movement. This approach defines our risk to the premium paid while offering significant upside potential if the trend continues as expected.
However, we must monitor risks associated with the prolonged US government shutdown mentioned in the analysis. While the dollar has remained strong so far, a protracted shutdown could eventually weigh on US economic activity and investor sentiment, as we saw during the 35-day shutdown in 2018-2019. Any sign of significant economic damage from the shutdown could abruptly reverse the dollar’s gains.
Key Factors and Potential Risks
Another key factor is the prevailing risk-on sentiment in global markets, which is currently suppressing demand for the safe-haven Swiss franc. We need to watch for any shifts in this sentiment, as a sudden turn towards risk aversion could quickly strengthen the franc and unwind this trade. Traders should therefore keep a close eye on global equity indices and geopolitical developments.
