FOMC Minutes Reveal Split on Rate Cuts

The latest FOMC Minutes indicate a split among committee members regarding rate cuts. There may be a pause if inflation decreases, but some officials wish to keep rates steady after three cuts this year. The likelihood of a 25-basis-point rate cut in January has dropped to 14.9%. Concerns about additional US rate cuts in 2026 and fiscal challenges could put pressure on the Dollar. Demand for the Swiss Franc may rise due to geopolitical tensions involving Russia, the Middle East, and US-Venezuela relations. The Swiss Franc is a popular currency known for its safety during uncertain times, thanks to Switzerland’s stable economy and political neutrality. It was pegged to the Euro from 2011 to 2015, making it more closely linked to Euro movements. The Swiss National Bank’s decisions influence the Franc’s value by responding to economic conditions and inflation. The Federal Reserve’s pause on rate cuts is crucial for us right now. This contrasts with the three reductions earlier in 2025, which addressed a weaker labor market. We can expect the US Dollar to stay strong against the Swiss Franc as we approach January 2026. Recent US labor data shows stability, with the unemployment rate steady at 4.2%. This supports the Fed’s cautious approach. The market now expects an over 85% chance that rates will remain unchanged at the January meeting. This could make options betting on USD/CHF rising toward the 0.8000 level a good short-term strategy.

Strategies for Dealing with Volatility

We should also keep an eye on the Swiss economy, which is showing surprising strength, as indicated by the KOF indicator at a high. Geopolitical tensions could lead to a quick move toward safer assets, strengthening the Franc as seen in previous crises. The tension between a strong USD and a potentially resilient CHF may result in increased volatility in the weeks ahead. To navigate this expected fluctuation, buying straddles or strangles on USD/CHF could be effective, as these strategies profit from significant movements in either direction. Market data shows that implied volatility for major currency pairs has risen above 15% in the last quarter of 2025. This indicates that options are becoming more expensive but are essential for maneuvering in the market. In terms of monetary policy, the Swiss National Bank does not feel pressured to act aggressively. Swiss inflation was stable at 1.8% last month, comfortably within their target range, allowing them to stay patient. This difference in approach compared to the Fed’s current hawkish pause supports a stronger USD/CHF at least until the Fed signals its next move. Create your live VT Markets account and start trading now.

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