The USD/CHF pair has bounced back from a 15-year low of 0.7600 and moved above 0.7680 as traders await the Federal Reserve’s monetary policy decision. Many are reducing their short positions on the US Dollar before the Fed meeting, where stable interest rates are expected despite political pressures on the central bank. Political issues may influence the Fed’s decisions, including attempts to remove Governor Lisa Cook and an investigation into Chairman Powell. In Switzerland, the ZEW Survey indicated a drop in economic expectations to -4.7 in January, down from 6.2 in December, which is putting additional pressure on the Swiss Franc.

Economic Data Influence

Recently released US data shows a decline in consumer confidence, with the Consumer Sentiment Index hitting an 11-year low. Additionally, the ADP report revealed a slowdown in job growth for the third week of January, which could hurt confidence in the US Dollar. The Swiss ZEW Survey, which assesses the Swiss economic outlook, also reported a decline. The latest survey from the Centre for European Economic Research recorded -4.7 in January, signaling a decrease in optimism about Swiss economic conditions. The increase in USD/CHF from its 15-year low near 0.7600 is a cautious reaction to today’s Federal Reserve meeting, rather than a shift in the overall trend. Traders are simply scaling back their short dollar positions ahead of this highly anticipated event. The underlying weakness in the US, emphasized by the recent drop in consumer confidence to an 11-year low, is still a major concern. In the US, political pressure on the Fed creates a backdrop of high uncertainty, which is beneficial for option premiums. Last month’s Non-Farm Payrolls report, which showed an addition of only 95,000 jobs, reveals a slowing labor market, while core inflation remains stubbornly above 3%. This situation limits the Fed’s ability to indicate aggressive rate cuts, meaning that any deviation from this cautious approach could lead to significant market volatility.

Strategic Market Positions

Meanwhile, the Swiss Franc faces challenges from its own negative economic outlook, reflected in the notable drop of the ZEW survey to -4.7. December 2025 Swiss inflation data showed a decrease to just 0.8%, giving the Swiss National Bank (SNB) strong reasons to consider rate cuts before the Fed. The SNB has previously acted decisively to weaken the Franc, and current conditions remind us of times when such actions were taken. Considering these contrasting factors, we believe that buying volatility is the most sensible strategy for the next few weeks. A long straddle on USD/CHF, where you purchase both a call and a put option with the same strike price and expiration, can be effective. This position will benefit from a significant price change in either direction, which is likely after the Fed’s announcements. For traders looking for a more directional approach, the most likely movement for USD/CHF is upward, driven by the SNB’s dovish stance. Buying near-term call options with a strike price around 0.7800 offers a cost-effective way to take advantage of potential Swiss Franc weakness. We think the risks are tilted towards a scenario where Swiss economic data influences the SNB before the Fed feels ready to ease policy. Create your live VT Markets account and start trading now.

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