FX.co ★ Crude | USD/CHF

The USD/CHF currency pair closed Fridays European session around the 0.7950 level, a move that reflects a prevailing trend of US Dollar weakness driven by shifting market expectations regarding the Federal Reserves (Fed) future monetary policy trajectory. This weakness in the dollar has provided support for the Swiss Franc, which is otherwise managing its own delicate domestic policy environment. The core tension in the pair stems from a disconnect between the Feds projections and market pricing. Following the Federal Open Market Committees (FOMC) recent policy meeting, the median "dot plot" of official projections signaled a median expectation for the Federal Funds rate to be around 3.4% by the end of 2026. Given the most recent rate cut to a range of 3.50%-3.75%, this official projection implies only one single rate cut for the entirety of 2026. This contrasts sharply with the markets much more aggressive expectations. Data from the CME FedWatch Tool indicates that traders are pricing in a significantly higher probability—around 58%—of the Fed implementing at least two rate cuts by October 2026, with some forecasts from major investment banks also anticipating two cuts next year. This discrepancy suggests the market believes the Fed will be forced to become more accommodative than its current official stance suggests, likely due to a perceived weakening in the US labor market or a more rapid decline in inflation toward the 2% target. This dovish repricing has placed the US Dollar Index (DXY), which measures the dollars strength against a basket of major currencies, under considerable strain. The DXY has struggled to recover momentum after hitting a seven-week low near 98.15, a testament to the powerful influence of rate-cut expectations on currency valuations. The immediate focus for dollar traders now shifts to the highly anticipated US Non-Farm Payrolls (NFP) report for November, which is scheduled for release next Tuesday. As the Fed has repeatedly stressed its data-dependent approach, a weak NFP number that signals further deterioration in the labor market would likely validate markets dovish expectations and trigger another wave of dollar selling, pushing the USD/CHF pair lower. Conversely, an unexpectedly strong job report could quickly recalibrate rate-cut bets, providing the dollar with a much-needed lift. On the Swiss side, the Franc is exhibiting relative stability, finding a foundation after a period of sharp appreciation. The stability follows the Swiss National Banks (SNB) latest monetary policy assessment, which concluded with the widely anticipated decision to keep its policy rate at zero percent (0%). The SNB reiterated its commitment to an accommodative monetary policy framework, maintaining that the current negative interest rate threshold is necessary to stimulate inflation and support economic growth in the coming quarters. Specifically, the SNBs updated forecasts project low inflation for 2026, with a median forecast of just 0.3%, indicating that their policy is positioned to fight deflationary risks and support the economy. While the SNB remains ready to intervene in foreign exchange markets if necessary to prevent excessive Franc appreciation, the current market dynamic is more about US Dollar weakness than fundamental Swiss Franc strength. In summary, the near-term fate of the USD/CHF pair is fundamentally tethered to the markets reaction to upcoming US economic data, particularly the NFP, and the subsequent change in the perceived likelihood of aggressive Fed rate cuts in 2026. The dollar is currently under pressure from a market anticipating a greater degree of monetary easing than what the Feds dot plot explicitly outlines. The Swiss Franc, meanwhile, is holding steady, its central bank committed to maintaining ultra-low interest rates to foster inflation and growth, making the Francs movement largely reactive to the Dollars policy shifts.