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    Swiss franc strengthens as USD/CHF declines, traders await Federal Reserve guidance on rates

    by VT Markets
    /
    Dec 10, 2025

    Focus on Fed’s Hawkish Guidance

    All eyes are on Fed Chair Jerome Powell’s press conference and new economic predictions as a hawkish cut becomes a possibility. Earlier this year, the Fed made two cuts, each by 25 basis points. They might indicate a pause in cuts until early 2026 due to inflation exceeding their target and a stable job market. The updated dot plot will shape market expectations. Previous projections hinted at one cut in 2026 and 2027, with no change in 2028, and a long-term rate of 3.0%. The Swiss National Bank is expected to keep its rates steady, based on a recent Reuters poll showing no changes, despite different views on future adjustments. With the weakness of the US Dollar before the Federal Reserve’s decision, the market has fully priced in a 25 basis point rate cut. Traders are currently focused on the chance of a “hawkish cut,” where the Fed cuts rates but indicates a pause in further easing. This creates opportunities for volatility plays, such as using options like straddles to benefit from a sharp move in either direction after Chair Powell’s press conference. Recent US economic data from November 2025 supports this hawkish outlook. Inflation remains stubbornly above 3%, and the labor market added a solid 195,000 jobs. This strength suggests the Fed has little reason to promise more cuts, which could strengthen the US Dollar if their updated dot plot shows a higher-for-longer approach. Derivative traders might consider buying short-term USD call options to prepare for a potential dollar rebound.

    Swiss National Bank Stance

    In the meantime, the Swiss National Bank is expected to maintain its rate at 0.00%. With Swiss inflation around a manageable 1.5% last month, this policy gap, with the Fed dealing with higher inflation while the SNB remains stable, should benefit the US Dollar over the Swiss Franc in the medium term. This widening policy gap makes selling CHF puts against the USD a smart strategy for those expecting a reversal in the pair’s recent slide. Create your live VT Markets account and start trading now.

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