USD/CHF rose on Monday as reduced expectations of a near-term US-Iran agreement supported the US Dollar and weighed on the Swiss Franc, even after Switzerland reported firmer output data. The pair was trading near 0.7878, up about 0.88%. Iran’s Tasnim News Agency said Tehran has halted message exchanges with Washington as Israel widens military operations against Hezbollah in southern Lebanon, while the US and Iran traded further attacks over the weekend. The Dollar recovered after last week’s softness that followed reports of a preliminary 60-day memorandum of understanding (MOU).
The US Dollar Index (DXY) traded around 99.33 after bouncing from Friday’s two-week low near 98.75. Oil strengthened, with West Texas Intermediate (WTI) up more than 5%, adding to inflation concerns and lifting US Treasury yields on expectations the Federal Reserve (Fed) may need to raise rates. By contrast, the Swiss National Bank (SNB) is expected to keep policy steady with inflation within its 0–2% target range; Swiss CPI due Thursday is seen at 0.8% in May versus 0.6% in April. US factory surveys improved as the S&P Global manufacturing PMI rose to 55.1 from 54.5, while the ISM measure climbed to 54, its highest since May 2022. Switzerland’s GDP grew 0.7% QoQ in Q1 versus 0.5% forecast after 0.2% previously, and the SVME PMI increased to 57.3 from 54.5.
Geopolitical Risks and Policy Divergence Favor the Dollar
Given the renewed geopolitical tensions and rising oil prices, we see the US Dollar as a primary beneficiary in the coming weeks. The breakdown in communication between Washington and Tehran, coupled with West Texas Intermediate crude oil recently surging past $90 a barrel, reinforces a risk-off sentiment that favors the dollar. This environment creates a clear headwind for currencies like the Swiss Franc.
This dollar strength is further supported by the growing divergence in monetary policy between the Federal Reserve and the Swiss National Bank. Recent US inflation data for May 2026 showed a stubborn 3.5% year-over-year increase, keeping the Fed on a hawkish path, while Switzerland’s inflation remains subdued at 1.4%, prompting the SNB to cut its key interest rate to 1.50% earlier this year. This policy gap makes holding US dollars more attractive than the Swiss Franc.
Economic Fundamentals and Trade Positioning
Economic data reinforces this narrative of two different economic speeds. The latest ISM Manufacturing PMI for the US registered a solid 50.5, indicating continued expansion and economic resilience. In contrast, Switzerland’s most recent Procure.ch Manufacturing PMI came in at a contractionary 46.4, suggesting its export-oriented economy is facing challenges.
For derivative traders, we believe this situation makes long USD/CHF positions attractive. We are looking at buying call options on USD/CHF to capitalize on the expected upward move while managing downside risk. The current environment suggests the pair could continue its climb from its current level around 0.9250, especially as the fundamental drivers supporting the dollar show no signs of easing.
