USD/CHF is rising and trading close to 0.7950 as the US Dollar gains strength. This is due to lower expectations for a Federal Reserve rate cut in December. The CME FedWatch Tool indicates a 46% chance of a 25-basis-point cut, down from 67% just a week ago. The delay in US economic data following the government reopening is creating uncertainty. The September Nonfarm Payrolls report is now expected on November 20. The Kansas City Fed President recommended controlling demand growth with monetary policy, while the St. Louis Fed President emphasized the resilience of the US economy.

Swiss Franc Support

The Swiss Franc might strengthen if the Swiss National Bank (SNB) keeps its policy rate at 0% in December due to inflation worries. An agreement between Switzerland and the US on tariffs has also supported the Franc, reducing previous high tariffs. As a popular global currency, the Swiss Franc serves as a safe-haven asset because of Switzerland’s stable economy and political neutrality. SNB decisions, especially during inflationary times, can bolster the Franc by increasing rates. Economic data and Eurozone policies significantly influence its value. The US Dollar is strengthening as the market reassesses a potential December Fed rate cut, pushing USD/CHF toward 0.7950. The chance of a 25-basis-point cut has decreased to 46%, a steep drop from 67% last week. This shift from Fed officials indicates that shorting the US Dollar could be risky now. A key event is the delayed September Nonfarm Payrolls report set for November 20. We remember how a strong jobs report in October 2023, which added 336,000 jobs, led to a dollar rally. A similar positive surprise this week could dash any hopes for a December rate cut and likely push USD/CHF higher.

Potential Rate Decisions Impact

However, we think the upside for USD/CHF might be limited since the SNB is expected to stay firm at 0%. Although Swiss inflation is low, it has been rising recently, making the SNB cautious about cutting rates too soon. The new 15% tariff agreement with the US also removes a significant uncertainty for the Swiss economy, offering some support to the Franc. With the upcoming US jobs data posing major event risks, there are opportunities in the options market. Implied volatility is expected to rise as we approach the November 20 announcement, making a long straddle a suitable strategy. By buying both a call and a put option, we can be ready for a significant price movement in either direction without needing to predict the outcome precisely. Looking ahead to December, the situation will depend on policy decisions from both the Fed and the SNB. Unlike mid-2024 when the SNB was cutting rates while the Fed maintained theirs, there’s now less divergence in their policies. This could make the pair more range-bound, so strategies that benefit from low volatility, like selling an iron condor, may become appealing after the central bank meetings. Create your live VT Markets account and start trading now.

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