A hawkish Fed and a dovish SNB are driving gains in USDCHF

• USDCHF has strengthened sharply, rising 1.3% this week and more than 3.3% since the start of the month, supported by a stronger US dollar and weaker Swiss franc
• The Fed’s hawkish tone boosted the dollar, as markets increased expectations for a possible US rate hike after Kevin Warsh emphasized price stability and the fight against inflation
• The Swiss franc came under pressure after the SNB kept rates at 0% and signaled readiness to intervene in the FX market to prevent excessive franc appreciation, which supports the upward bias in USDCHF

The USDCHF pair has strengthened noticeably in recent days. This week, the exchange rate rose by 1.3%, and since the beginning of the current month it has gained more than 3.3%. This move has been driven mainly by a combination of a stronger dollar and a weaker Swiss franc, which came under pressure following the Swiss National Bank’s statement.

On the US side, the key factor was the FOMC’s decision to leave interest rates unchanged in the 3.5–3.75% range, as well as Kevin Warsh’s first press conference as Chair of the Federal Reserve. Warsh strongly emphasized that the Fed’s priority remains price stability, meaning the fight against inflation. Investors interpreted this message as a signal that the US central bank could return to rate hikes sooner if incoming data confirm persistent price pressures.

As a result, expectations for a more restrictive monetary policy in the United States increased. The market began pricing in the possibility of a rate hike within the next six weeks as a scenario close to a 50% probability. This supported the dollar, especially against lower-yielding currencies such as the Swiss franc.

The SNB keeps rates unchanged but warns against an excessively strong Franc

In Switzerland, the Swiss National Bank kept its main interest rate at 0%, while at the same time emphasizing its readiness to intervene in the foreign exchange market. This means that, if necessary, the SNB may sell francs to limit an excessively rapid and excessive appreciation of the currency.

For the market, this was an important signal. The franc remains one of the key safe-haven currencies, which is why it often strengthens during periods of geopolitical tension. However, the SNB indicated that an overly strong currency could harm the economy, especially exporters, and further reduce inflation. After the statement, the franc weakened against the euro, confirming that investors interpreted the central bank’s stance as a factor limiting the Swiss currency’s appreciation potential.

Inflation in Switzerland currently stands at 0.6% and remains within the SNB’s target range of 0% to 2%. The bank slightly raised its inflation forecast for this year from 0.5% to 0.6%, while expecting only moderate price growth in the following years. At the same time, the economic growth forecast remained unchanged, assuming growth of around 1% this year and 1.5% next year. This shows that the SNB’s main concern is currently not inflation, but the exchange rate of the franc.

Diverging central bank stances support USDCHF

The current situation in USDCHF clearly reflects the divergence between Fed and SNB policy. The Federal Reserve is signaling greater determination in fighting inflation and may be ready to tighten monetary policy further. The SNB, by contrast, is keeping rates at 0% and is focused primarily on preventing excessive appreciation of the franc.

This combination supports further gains in USDCHF. The dollar is benefiting from higher expectations for US interest rates, while the franc remains under pressure due to the SNB’s readiness to act in the foreign exchange market. In addition, the temporary agreement in the Middle East reduced demand for safe-haven assets, which also limited interest in the franc.

The market will remain sensitive to data and geopolitics

In the coming weeks, the performance of USDCHF will depend mainly on two factors: US macroeconomic data and the level of geopolitical tensions. If inflation in the United States remains elevated and the Fed maintains a firm tone, the dollar may continue to strengthen. Warsh has announced less predictable communication and greater dependence of decisions on incoming data, which could increase volatility in the currency market.

On the other hand, a decline in oil prices, weaker economic growth or lower inflation readings could reduce expectations for US rate hikes and therefore weigh on the dollar. For the franc, the key issue will remain whether geopolitical tensions rise again. A return of risk aversion could increase demand for the Swiss currency, although the SNB has clearly suggested that it will counteract any excessively sharp appreciation.

USDCHF maintains a bullish bias

For now, the balance of fundamental factors supports further strength in USDCHF. The pair is benefiting both from dollar appreciation following the Fed’s hawkish message and from franc weakness after the SNB’s statement. The 1.3% weekly rise and the gain of more than 3.3% since the beginning of the month show that investors are clearly shifting capital toward the US currency. As long as the market continues to price in the possibility of rate hikes in the United States, while the SNB signals readiness to limit franc strength, USDCHF may remain under upward pressure.