The Swiss Franc traded flat against major peers, near 0.7820 per US Dollar during Thursday’s European session. USD/CHF held steady as markets awaited comments from US President Donald Trump after meeting China’s leader Xi Jinping.
Xi welcomed visits by US business leaders alongside Trump and referred to improved trade prospects. He also warned of conflict if Washington “mishandled” the Taiwan issue.
Dollar Index Holds Near Weekly High
The US Dollar Index traded near 98.50, close to Wednesday’s weekly high of 98.60. Expectations for the Federal Reserve to keep rates unchanged or raise them at least once by year-end supported the Dollar.
CME FedWatch put the chance of at least one rate rise this year at 32.2%, up from almost nil a month ago. The probability of a rate cut this year was 1%, with the remainder pointing to no change.
US CPI data on Tuesday showed headline inflation rising to 3.8% year-on-year in April from 3.3%. This reduced expectations for more accommodative Fed policy.
The Swiss Franc is a top ten traded currency and was pegged to the Euro from 2011 to 2015; the removal led to a rise of over 20%. The SNB meets four times a year and targets inflation below 2%, while CHF and EUR trends show a correlation above 90%.
Policy Expectations Now Drive The Pair
We recall that last year, the US Dollar was consolidating against the Swiss Franc around the 0.7820 level amid a very different interest rate outlook. Today, on May 14, 2026, the landscape has completely shifted, with the USD/CHF pair now trading significantly higher near 0.9150. This change reflects a major reversal in central bank policy expectations over the past twelve months.
Looking back to 2025, the market was pricing in a 32% chance of a Federal Reserve rate hike, driven by hot US inflation data that showed a 3.8% annual increase. We are now seeing a much cooler US Consumer Price Index, which registered a 2.9% year-over-year increase in the latest report. Consequently, the CME FedWatch Tool currently indicates a 65% probability that the Fed will cut interest rates by September.
On the Swiss side, the Swiss National Bank (SNB) has already acted to weaken the franc in the face of slowing growth in the neighboring Eurozone. The SNB cut its key policy rate by 25 basis points to 1.25% in its March 2026 meeting, a move justified by Switzerland’s low inflation, which recently came in at just 1.4%. This policy divergence between a dovish SNB and a potentially dovish Fed is now the central theme for the currency pair.
For derivative traders, this environment suggests focusing on strategies sensitive to interest rate differentials. Given the expectation of Fed cuts, volatility in USD/CHF could increase around key US data releases, such as employment and inflation reports. Options traders might consider buying USD/CHF call spreads to position for a capped, further upside if the SNB remains more aggressive in its easing cycle than the Fed.
Despite the franc’s current weakness, we must not forget its safe-haven status, which was a key factor in 2025 during US-China trade discussions. Any unexpected rise in global geopolitical tensions could trigger a rapid flight to safety, causing a sharp appreciation in the CHF that would override the current fundamental picture. Therefore, holding some out-of-the-money CHF call options could serve as a valuable hedge against unforeseen market turmoil in the coming weeks.
