USD/CHF has risen towards 0.7800, influenced by President Trump’s threat of a 100% tariff on Canada if it reaches a trade deal with China. When trading began, the pair was at about 0.7770, after starting lower during Monday’s Asian session. The US Dollar has since bounced back from earlier losses. There are concerns that the US Dollar might decline due to rumors about efforts to support the Yen. Reports suggest that the New York Federal Reserve has performed a rate check with major banks, hinting at possible market interventions to help the Japanese Yen.

Swiss Franc as a Top Hedge

The Swiss Franc may receive backing as Goldman Sachs sees it as a strong hedge against risks from central banks. Switzerland’s solid fiscal position makes the Franc a safe choice, keeping it strong against global inflation pressures. Market sentiment, economic indicators, and the Swiss National Bank’s (SNB) policy decisions all influence the Swiss Franc. The currency is also affected by the stability of the Eurozone due to Switzerland’s close economic links. The economic health of Switzerland and the SNB’s monetary policies, including interest rate changes, can alter the Franc’s value. Reflecting on the tariff threats from late 2025, we noted how geopolitical risks can quickly strengthen the US Dollar. This scenario pushed USD/CHF closer to 0.7800, highlighting the impact of political news on market sentiment. As of late January 2026, the focus has returned to fundamental factors that still support a strong Dollar. Recent US inflation data from December 2025 showed a rate of 3.4%, which was higher than expected. Additionally, the job market remains robust with over 200,000 jobs added. This situation suggests that the Federal Reserve will be cautious about cutting interest rates, helping the USD remain strong.

Potential for Increased Volatility

However, the Swiss Franc’s strength against inflation is now being tested. With Switzerland’s latest inflation rate steady at a low 1.7%, the Swiss National Bank may cut rates sooner than other major central banks. This difference in monetary policy could limit the Franc’s strength in the short term. With these mixed signals, we expect increased volatility in the USD/CHF pair. Implied volatility for one-month options has risen to 7.8%, up from 7.2% last month, indicating market uncertainty. Traders might consider strategies like long straddles to benefit from a significant price movement in either direction without predicting the outcome. We must also consider the intervention rumors from last year. The possibility of coordinated actions to weaken the US Dollar, especially to support the Yen, remains a notable risk for those with long USD positions. Such actions could drive USD/CHF down sharply, regardless of the interest rate differences. Create your live VT Markets account and start trading now.

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