USD/CHF edged up to about 0.7820 in early European trade on Monday, holding above 0.7800 after modest losses the prior day. The move followed a firmer US Dollar as expectations for Federal Reserve rate cuts eased amid inflation concerns linked to higher energy prices and Middle East tensions.
Fed Governor Christopher Waller said on Friday that the job market’s break-even rate is likely near zero. He also warned that a prolonged Middle East conflict could raise risks to both inflation and employment.
San Francisco Fed President Mary Daly said she is assessing whether rising oil prices are feeding into broader goods and services inflation. The US Dollar also drew support from safe-haven demand amid renewed US–Iran tensions.
The Guardian reported on Monday that Iran’s Foreign Ministry spokesman Esmail Baghaei called the US blockade of Iran’s ports and coastline an act of aggression and a ceasefire violation. He said on social media that collective punishment of Iran’s population amounts to a war crime and crime against humanity.
The Swiss Franc may also gain from safe-haven flows, while energy-driven inflation worries could affect Swiss National Bank policy expectations. SNB minutes from March cited rising uncertainty and said the SNB may intervene in FX markets to limit rapid CHF appreciation.
Swiss trade balance data is due Tuesday, with US retail sales due later on Monday.
We see the US Dollar strengthening against the Swiss Franc as the Federal Reserve appears unlikely to cut interest rates soon. Recent US inflation data for March 2026 came in at a persistent 3.6%, fueling concerns that the fight against rising prices is not over. This gives the dollar an edge over other currencies, even traditional safe havens like the franc.
The Fed’s cautious stance is creating a clear policy difference with other central banks. Market pricing from the CME FedWatch tool now suggests less than a 40% probability of a rate cut before the fourth quarter of 2026. This expectation for higher US rates for longer makes holding dollars more attractive for yield.
While the Swiss Franc is also seeing safe-haven demand, the Swiss National Bank (SNB) is acting as a cap on its strength. Looking back at 2025, we saw the SNB actively sell francs in the open market whenever USD/CHF dipped toward the 0.7600 level, showing a clear line in the sand. This willingness to intervene makes a rapid appreciation of the franc less likely, even with global uncertainty.
The ongoing tensions in the Middle East are the main driver for both inflation fears and safe-haven flows. With Brent crude oil prices holding stubbornly above $95 a barrel throughout early April 2026, energy costs are feeding directly into global inflation reports. This situation creates uncertainty that benefits both the dollar and the franc, but the Fed’s reaction appears more forceful.
For derivative traders, this conflict suggests a period of rising volatility. We believe that implied volatility on USD/CHF options is currently too low and that purchasing straddles or strangles could be a viable strategy to profit from a larger-than-expected price move in either direction over the coming weeks. The key is to anticipate a breakout from the current tight range.
However, a slight directional bias toward a higher USD/CHF seems warranted due to the central bank divergence. Consider moderately bullish strategies, such as buying call spreads, to gain from a potential upward move while limiting the initial cost. A break above the 0.7900 resistance level could be a key trigger for such a position.
In the near term, all eyes will be on the upcoming US Retail Sales data for a sign of consumer health. Following that, the US Personal Consumption Expenditures (PCE) price index at the end of the month will be crucial. A hot reading on the Fed’s preferred inflation gauge would likely push the dollar even higher.
