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    The pair trades around 0.7900 as the US dollar weakens due to expected Federal Reserve rate cuts.

    by VT Markets
    /
    Jan 2, 2026

    Rising Geopolitical Tensions Strengthen Swiss Franc

    Geopolitical tensions are boosting the Swiss Franc, a safe-haven currency. In December, the KOF Economic Indicator increased by 1.7 points, surpassing expectations. This suggests a better economic outlook, especially in the manufacturing sector. The Swiss Franc is affected by global market trends, the Swiss economy’s performance, and decisions made by the Swiss National Bank. It has historically been tied to the Euro’s value, meaning its worth closely follows the Eurozone’s economic health. Swiss National Bank policies, Eurozone events, and Switzerland’s economic data all influence the Franc’s exchange rate. With the Federal Reserve taking a more cautious approach, the US Dollar is expected to weaken. The market anticipates two more rate cuts by 2026, especially after the December 2025 Non-Farm Payrolls report showed job growth slowed to 155,000 and unemployment rose to 4.1%. This supports the belief that the Fed will keep easing monetary policy.

    New Fed Chair Nomination Brings Uncertainty

    A key event in the upcoming weeks is the nomination of a new Fed chair, which will cause uncertainty. We expect to see increased volatility in USD pairs as the announcement approaches. The market recalls the nervousness during the transition from Yellen to Powell in 2018, leading traders to consider options strategies like straddles for potential sharp moves once the new chair is announced. Meanwhile, the Swiss Franc remains strong. The KOF Economic Indicator from December 2025 reflects solid economic health, and ongoing geopolitical tensions enhance its appeal as a safe haven. Swiss inflation is steady at 1.8%, reducing pressure on the Swiss National Bank to cut rates, unlike the Fed. This difference in central bank policies suggests a likely decline for the USD/CHF pair. Traders should consider preparing for further drops, potentially using put options to aim for levels below 0.7900. With the dovish Fed and a strong Swiss Franc, there is a clear reason to expect the dollar to weaken against the Swiss currency. Create your live VT Markets account and start trading now.

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