USD/CHF steady near two-week high amid Fed caution and dovish SNB remarks

The Swiss Franc (CHF) weakens against the US Dollar (USD) on Thursday, with USD/CHF extending its advance to a two-week high around 0.8026, as the Greenback strengthens broadly following the Federal Reserve’s (Fed) latest interest rate decision and renewed optimism over a US-China trade truce.

The US Dollar Index (DXY), which measures the Greenback’s performance against a basket of six major currencies, surged to a three-month high near 98.53 at the time of writing, reflecting renewed buying interest after the Fed signaled a more cautious approach toward further rate cuts.

On Wednesday, the Fed delivered a second consecutive 25-basis-point (bps) rate cut, lowering the federal funds rate to a range of 3.75%-4.00%, in line with market expectations. However, the decision was not unanimous, with Governor Stephen Miran voting for a deeper 50 bps reduction and Kansas City Fed President Jeffrey Schmid preferring to keep rates unchanged.

During the post-meeting press conference, Fed Chair Jerome Powell said that “a further reduction in the policy rate at the December meeting is not a foregone conclusion, far from it.” Traders, who were previously almost certain of another cut in December, have now dialed back easing expectations.

Adding to the Dollar’s strength, US President Donald Trump and Chinese President Xi Jinping agreed earlier on Thursday to a one-year trade truce, which includes reducing US tariffs on Chinese goods and China’s commitment to resume purchases of US soybeans. Trump also said that China has agreed to “continue the flow of rare earth, critical minerals, magnets, etc., openly and freely.”

On the Swiss front, comments from Swiss National Bank (SNB) Governing Board Member Petra Tschudin offered little support to the Franc. Tschudin reiterated that the SNB’s monetary policy remains expansive and that inflation is expected to stay within the range of price stability.

He emphasized that the level of the Franc is not important in itself, only its effect on inflation, adding that the SNB is prepared to intervene in the currency market when necessary and would reintroduce negative interest rates if required, noting that “we know they work.”