The USD/CHF currency pair has dropped to around 0.7950 as US-China trade tensions rise. This fall comes as the market anticipates more Federal Reserve rate cuts by the end of the year. Heightened tensions follow President Trump’s comments about a “full-blown trade war” with China, including threats of 100% tariffs on Chinese imports. However, a possible meeting between Trump and Chinese President Xi Jinping might spark hope for a trade truce. Regarding monetary policy, there is a 97% chance of a 25-basis-point rate cut at the Federal Reserve’s October meeting, with over a 93% chance of another cut in December. The ongoing US government shutdown adds more uncertainty, potentially putting over 10,000 federal jobs at risk.

Swiss Economic Outlook

In Switzerland, SECO has updated its growth forecasts. They predict a GDP growth of 1.3% for 2025 but have lowered the 2026 forecast to 0.9%. Inflation is expected to stay low, which may lead the Swiss National Bank (SNB) to remain cautious. The Swiss Franc is performing well against the Australian Dollar, as shown in percentage changes. The market predicts a weaker US Dollar for the rest of the year. With a 97% chance of a rate cut this month and another likely in December, selling USD rallies seems to be the main strategy. This marks a significant change from the aggressive rate hikes seen in 2022 and 2023. For USD/CHF, this outlook suggests that buying puts or setting up bear put spreads could be a smart way to benefit from further declines. The ongoing US-China trade tensions and the government shutdown keep market uncertainty high, with the CBOE Volatility Index (VIX) recently above 20. This persistent fear supports the Swiss Franc’s appeal as a safe haven, despite its own economic issues.

Swiss National Bank Policy

It’s important to note that the Swiss National Bank is taking a cautious approach due to weak growth forecasts for 2026. Swiss government data shows inflation has been below 2% for more than a year, giving the central bank no reason to tighten its policies. This situation highlights that the current dynamics are more about weakness in the US Dollar than strength in the Swiss Franc. Traders should pay attention to the recent low of 0.7933 as a key level; if it breaks below this, it could lead to levels not seen since early 2015. However, the latest US jobs report, which revealed the addition of 160,000 jobs in September, might prompt the Fed to adopt a more cautious tone, potentially creating short-term rebounds in the dollar. We view any such strength as an opportunity to enter new short positions at better levels. Create your live VT Markets account and start trading now.

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