USD/CHF fell for a second day and traded near 0.7800 in Asian hours on Wednesday. The move came as the US Dollar weakened amid a risk-on mood linked to hopes of a US-Iran deal.
The ceasefire that began nearly a month ago remains in place, according to US Defense Secretary Pete Hegseth. US Secretary of State Marco Rubio said offensive operations have ended, with attention shifting to protecting shipping routes in the Strait of Hormuz.
Ceasefire Holds Risk On Mood Builds
US President Donald Trump said the US would temporarily pause efforts to help stranded vessels leave the Strait of Hormuz. The blockade on ships travelling to and from Iranian ports will remain in effect.
The US Dollar also faced pressure as oil prices fell, which eased inflation concerns. This reduced expectations that the Federal Reserve may need to raise interest rates to manage price pressures.
Switzerland’s headline inflation rose to 0.6% year-on-year in April, up from 0.3% in March and above the SNB’s 0.5% average forecast for this year. Core inflation eased to 0.3% from 0.4%, the lowest since July 2021.
The SNB is widely expected to keep interest rates at 0% in June and possibly for the next 12 months.
From 2025 Weak Dollar To 2026 Rate Divergence
We remember looking back in 2025 when the dollar weakened significantly on hopes of a deal with Iran, pushing the USD/CHF pair down towards 0.7800. That risk-on mood was driven by expectations of lower oil prices and a less aggressive Federal Reserve. The entire market dynamic was based on geopolitical de-escalation.
The environment today on May 6, 2026, is markedly different, with USD/CHF trading near 0.9450. The primary driver is now the stark interest rate differential between the US and Switzerland. With the Fed Funds Rate holding at 4.0% and the Swiss National Bank’s policy rate at 0.75%, the dollar’s yield advantage is compelling.
This policy divergence is rooted in contrasting inflation data, which has become the market’s main focus. We see US core inflation struggling to fall below 2.8%, while recent Swiss CPI data for April 2026 showed a benign 1.4% annual rate. This gives the SNB room for further easing while the Fed remains cautious.
Unlike the optimism in 2025, geopolitical tensions have resurfaced elsewhere, keeping WTI crude oil prices elevated above $85 per barrel. This is a reversal from the retreat in energy prices we saw last year. A strong dollar is now viewed more as a safe haven amid this renewed uncertainty.
For derivative traders, this suggests a strategy of buying USD/CHF call options with strike prices around 0.9500 and 0.9600 to capture further upside. Selling out-of-the-money puts to collect premium could also be attractive, as the significant rate gap provides a strong floor for the pair. The low levels of 2025 seem very distant now.
Implied volatility in the pair has been trending lower as the interest rate narrative remains consistent and powerful. This could make long volatility positions expensive, but it may also present opportunities for income-generating strategies. We should, however, remain watchful for any sudden shifts in central bank guidance that could reintroduce price swings.
