USD/CHF held near 0.7870 in early European trading on Monday, close to its highest level since 30 April. The move came as the US Dollar stayed firm, with markets watching developments in the US-Iran conflict.
Hotter US inflation data last week pushed markets to reprice the chance of Federal Reserve rate rises later this year. The CME FedWatch tool showed a 48.4% probability of at least a 25 basis point hike in December, up from 14.3% a week earlier.
US President Donald Trump said on Sunday that the “clock is ticking” for Iran as talks to end the war stalled. Iranian media reported the US response to Tehran’s latest proposals included no concrete concessions.
Ongoing tension was described as supportive for the Dollar against the Swiss Franc, with the US seen as less exposed to global energy shocks. RBC Capital Markets said this is linked to the US being a net oil exporter, unlike Switzerland.
The Swiss Franc is shaped by market sentiment, domestic conditions, and Swiss National Bank policy, which targets inflation below 2% and meets four times a year. It was pegged to the euro from 2011 to 2015, and the peg’s removal led to a rise of more than 20%, while the CHF remains over 90% correlated with the euro.
We are seeing a familiar pattern in USD/CHF, which is now testing the 0.8100 level. This builds on the momentum from last year when the pair climbed steadily from the 0.78s in the spring of 2025. The core drivers of a strong dollar, US inflation and geopolitical tensions, remain firmly in place.
Recent US CPI data for April 2026 came in hotter than expected at 3.8%, reigniting fears of persistent inflation. This echoes the situation we saw in 2025, where surprisingly high inflation reports forced a repricing of Fed rate hikes. Markets are now anticipating a hawkish tone from the Fed’s upcoming June meeting, which continues to support the dollar.
For traders, this suggests that long USD/CHF positions could remain profitable. Buying call options on the pair with a strike around 0.8200 offers a way to capture further upside potential. This strategy provides a defined risk if the trend unexpectedly reverses.
However, we must watch the Swiss National Bank (SNB) very closely. Swiss inflation, while lower than in the US, is holding at 2.1%, slightly above the SNB’s target. Any surprise rate hike from the SNB to defend the franc’s value could cause a sharp downturn in USD/CHF.
This divergence between the Fed’s likely path and the SNB’s potential reaction creates an environment ripe for volatility. Traders could consider straddles on USD/CHF, which would profit from a large move in either direction. We only need to look back to the 2015 de-pegging to remember how quickly the SNB can move markets.
The ongoing tensions with Iran, which were a key factor in 2025, continue to provide a floor for the US dollar. As a net energy exporter, the US is better insulated from energy price shocks than Switzerland. This geopolitical risk premium favors holding long dollar positions against the franc.
Given these conflicting pressures, implied volatility on USD/CHF options appears relatively low. We believe buying volatility through instruments like strangles is a prudent approach. This positions us to benefit from the significant market adjustment that will occur once either the Fed or the SNB makes a decisive move.
