The US Dollar has gained strength as trade tensions between the United States and China ease. This has sparked optimism for a potential trade deal at the upcoming meeting between US President Trump and China’s Xi Jinping. The USD/CHF is currently trading around 0.7960, a rise of 0.10% today. US Treasury Secretary Scott Bessent announced that the 100% tariffs on Chinese goods are no longer an option, which has boosted market sentiment and helped the Dollar recover.

Impact Of Federal Reserve Rate Cuts

Possible rate cuts from the Federal Reserve could limit the rise of the US Dollar. The market expects a 97% chance of a 25-basis point cut this week, and a 96% chance of another cut in December, according to the CME FedWatch tool. In the US, the Consumer Price Index rose 3% year-over-year in September, slowing to 0.3% on a monthly basis. The Swiss Franc remains stable, supported by the Swiss National Bank’s decision not to ease monetary policy further, as they see no significant deflation risks. All eyes are on upcoming US economic data and the Federal Reserve’s policy meeting. The hope for a US-China trade breakthrough is keeping the USD/CHF strong today. The US Dollar is showing mixed strength against major currencies, being strongest against the Japanese Yen. Right now, the USD/CHF is trading near 0.9150, much higher than the levels below 0.8000 seen during the US-China trade war. The main factor today is the difference in policies between the possibly pausing Federal Reserve and the cautious Swiss National Bank. This situation is different from the coordinated easing we observed in the past.

Swiss National Bank’s Inflation Challenges

The latest US inflation data from earlier this month showed the Consumer Price Index at 3.5% for September 2025, which cooled more than expected. This has increased expectations for a shift in Fed policy. Markets are now pricing in an 85% chance that the Fed will keep rates steady in December, a significant change from earlier expectations for rate cuts. This shift implies that using options to trade around Fed announcements may be a wise approach. On the other hand, the Swiss National Bank is facing persistent domestic inflation, reported at 2.1%, which is still above their target. This makes it unlikely for the SNB to indicate any policy easing, providing support for the franc and limiting significant gains for the USD/CHF pair. Selling out-of-the-money call options on USD/CHF could be a good strategy to take advantage of this expected resistance. Focus has shifted from past US-China trade disputes to current tensions around US and EU digital trade policies. Slow progress in recent discussions is raising market uncertainty and enhancing the franc’s appeal as a safe-haven investment. Traders might consider buying short-dated puts to protect against any sudden risk-off moves that would boost the CHF. Given the current situation, implied volatility in the franc has been rising as we approach year-end central bank meetings. A collar strategy, which involves buying a protective put and selling an upside call, could help traders limit their downside risk on long dollar positions. This strategy prepares a portfolio for unexpected Fed announcements or rising geopolitical tensions. Create your live VT Markets account and start trading now.

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