Swiss Franc Softens on Fed Hike Expectations and Steady SNB

Key Moments

CHF Under Pressure Ahead of Fed Meeting

The Swiss Franc was weaker against the US Dollar on Tuesday as traders positioned ahead of the Federal Reserve’s policy announcement on Wednesday. The USD/CHF pair traded modestly higher near 0.8178 during the Asian session, reflecting a firmer Greenback as investors anticipated tighter US monetary policy.

The move in the currency pair has been driven by growing conviction that the Federal Reserve will raise interest rates at its upcoming meeting. In contrast, market participants expect the Swiss National Bank to keep its benchmark rate at 0% at its policy gathering later this month.

At the time of reporting, the US Dollar Index (DXY) – which tracks the Greenback against six major peers – was up 0.1%, trading close to 99.58.

Market Focus on First Fed Hike Since 2023 and Warsh’s Outlook

Strategists at Brown Brothers Harriman (BBH) anticipate the Federal Open Market Committee will end its run of five consecutive decisions to leave rates unchanged. They noted that “the FOMC is poised to deliver a 25bps hike to a target range of 3.75%-4.00% on Wednesday, marking its first hike since July 2023.”

BBH attributed the likely move to underlying economic conditions, stating that “persistently above target US inflation and a stable labor market justify a rate increase,” and highlighted that market positioning already reflects this view, with “Fed funds futures price in roughly 90% odds of a hike this week.”

With a rate increase broadly expected, attention has shifted to the policy message and communication from Fed officials. Analysts see the monetary policy statement and comments from Fed Chair Kevin Warsh as critical for determining the next phase of US Dollar pricing.

BBH further emphasized that “the vote split, updated Summary of Economic Projections (SEP), and Fed Chair Kevin Warsh’s press conference will guide the market reaction,” as investors examine the decision for clues on the future policy trajectory.

SNB Expected to Hold at Zero, Easing Bias Intact

In Switzerland, market pricing suggests the SNB will maintain its accommodative stance and keep its policy rate at 0% at its upcoming meeting later in the month, in line with its broader easing posture.

Nomura’s analysts see limited incentive for the SNB to alter course, arguing that “in Switzerland, we expect no change in rates for the foreseeable future, as inflation is low, but the policy rate is 0.00% and the SNB has expressed caution about unwanted side effects of a negative policy rate.”

They believe that the combination of subdued inflation dynamics and concerns about the implications of reintroducing negative rates supports a wait-and-see approach, reinforcing expectations that the SNB will remain on hold.

USD/CHF Technical Landscape

On the daily chart, USD/CHF was last seen around 0.8179, holding above the 20-day exponential moving average (EMA) at 0.8111. This positioning keeps the short-term structure underpinned and indicates a constructive tone as the pair consolidates above this moving average.

The Relative Strength Index (RSI) hovered near 63, staying in positive territory without entering overbought levels. This configuration suggests that bullish momentum remains in place but has not yet reached extreme readings.

On the downside, the 20-day EMA at 0.8111 is the initial technical support. A daily close below this level would undermine the current constructive bias and increase the risk of a deeper correction toward earlier lows. As long as pricing remains above the 20-day EMA and the RSI holds in the upper half of its range, pullbacks are expected to attract buying interest, leaving the near-term bias inclined to the upside even without clearly defined nearby resistance levels.