USD/CHF slides as Fed easing expectations pressure US Dollar, SNB holds steady

USD/CHF extends its decline for a second consecutive session, down 0.60% on Tuesday at the time of writing, returning to an October 17 low near 0.7873. The pair’s drop mainly reflects broad-based weakness in the US Dollar (USD) amid rising expectations of monetary easing by the Federal Reserve (Fed), while the Swiss Franc benefits from a domestic monetary backdrop seen as stable.

On the Swiss side, the Swiss National Bank (SNB) reiterates its unchanged stance. In its fourth-quarter Quarterly Bulletin, the institution says it kept its policy rate at 0%, judging that medium-term inflation pressures remain broadly contained. The SNB views the current policy setting as appropriate to support economic activity while ensuring price stability.

This assessment is consistent with the Swiss ZEW Survey for December, published earlier in the day, which slipped to 6.2 from 12.2 previously. The decline in this confidence indicator points to more cautious economic prospects, but not enough to undermine the idea that the central bank is under no immediate pressure to tighten monetary policy.

On the US front, the US Dollar remains under pressure as markets ramp up bets on further Fed rate cuts. Investors are now pricing in a higher chance of two additional interest rate reductions by the central bank in 2026, weighing on the Greenback and contributing to the offered tone around USD/CHF.

Recent comments from policymakers highlight persistent divisions within the central bank. Fed Board of Governors member Stephen Miran said in an interview on Bloomberg TV that recent data align with his macroeconomic outlook and that he does not see a recession in the near term, while warning that failing to ease policy could raise recession risks. By contrast, Cleveland Fed President Beth Hammack argued that monetary policy is in a good position to pause and assess the effects of the cumulative 75-basis-point rate cuts already delivered.

Uncertainty surrounding the Federal Reserve’s credibility and communication framework is adding another layer of pressure on the US Dollar. US Treasury Secretary Scott Bessent floated the idea that a new Federal Reserve chair could scrap the dot plot and revise the central bank’s inflation framework and communication strategy, fuelling market uncertainty.

Traders now look ahead to US macroeconomic releases due later in the day, including the third-quarter Gross Domestic Product (GDP) annualized reading, expected at 3.2% after 3.8% in the previous quarter, alongside the ADP Employment Change four-week average and third-quarter Core Personal Consumption Expenditures (PCE). These data points could provide short-term direction for USD/CHF.

In this context, the US Dollar Index (DXY), which tracks the Greenback against six major currencies, is down 0.37% at 97.90, at the time of press, not far from its recent 11-week low, continuing to strengthen the pair’s bearish bias against the Swiss Franc (CHF).