USD/CHF increased to around 0.8050, thanks to a slight improvement in market sentiment. However, investors are still cautious because of ongoing trade tensions between the US and China, especially after recent tariff threats. Although there has been a minor recovery, worries about a possible trade war remain, especially after new US tariff announcements. The US Dollar Index fell nearly 1% following these developments, highlighting fears of an economic conflict.

Market Sentiment Boosts USD/CHF

A more friendly approach emerged on Sunday, lifting market sentiment and helping USD/CHF rise to about 0.8050. Since mid-September, the trend has favored the US Dollar due to increasing demand, even with uncertainty about the economic impact of the US government shutdown. In Switzerland, the Producer and Import Prices Index data for September, set to release on Tuesday, is expected to provide clues about inflation. A rebound after months of decline could ease pressure on the Swiss National Bank regarding monetary policy. Today’s currency updates show how the Swiss Franc is performing against major currencies. The Franc strengthened against the Euro, demonstrating relative resilience in the current economic climate. The recent rise in USD/CHF towards 0.8050 seems fragile and depends on temporary sentiment. The ongoing US-China trade issues pose a risk that could quickly reverse these gains, reminding us of the volatility experienced during similar disputes in the late 2010s. Recent data indicates that high-tech exports to China have dropped 12% year-over-year by the third quarter of 2025, pointing to underlying economic strain.

Expectations and Strategies in Foreign Exchange

The upcoming Swiss Producer and Import Prices data is crucial for the coming weeks. If inflation rises more than expected, perhaps by the forecasted 0.3%, the Swiss National Bank may adopt a less dovish stance, which could push USD/CHF below the 0.8000 level. Derivative traders might consider buying short-dated puts to protect against a surprisingly strong Swiss Franc. With mixed signals, we expect options volatility to increase from current lows. Implied volatility for one-month USD/CHF options has already risen to 7.8% this week, compared to a quarterly average of 6.5%, indicating that the market anticipates a larger potential move. This makes strategies like long straddles attractive for those expecting a breakout in either direction when trade or inflation news emerges. For those looking to capitalize on the upward trend, a cautious approach is wise. Using a bullish call spread targeting a move towards 0.8100 allows traders to benefit from further dollar strength while managing their maximum risk. This strategy guards against sudden downturns due to rising trade tensions or a hawkish shift from the SNB. Create your live VT Markets account and start trading now.

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