USD/CHF rose on Thursday after rebounding from lows near 0.7900 on Wednesday. It struggled to hold above the 0.8000 level despite softer Swiss inflation data.
Swiss CPI rose to 0.3% year-on-year in March from 0.1% in February. This was below the 0.5% forecast.
Swiss Inflation Misses Expectations
Monthly inflation slowed to 0.2% from 0.6% in February. It also missed the 0.5% consensus.
Higher heating oil prices were cited as the main driver of the rise in consumer prices. Energy costs lifted annual inflation to its highest level in one year, linked to the war in Iran.
This inflation rise may reduce pressure on the Swiss National Bank to cut rates into negative territory. That may support the Swiss Franc.
The Swiss Franc’s gains were limited as risk-averse sentiment supported the US Dollar. The mood followed disappointment after US President Trump’s address on Wednesday.
Risk Off Drives Dollar Demand
In a short televised speech, Trump pledged “crushing, broader and destructive” attacks on Iran. Markets then moved towards risk-off conditions, with equities falling sharply while the US Dollar and crude prices rose.
Looking back to this time in 2025, we recall a market driven by intense risk-off sentiment. The conflict in Iran and the resulting political rhetoric fueled a strong bid for the US Dollar, even as Swiss inflation was surprisingly soft. This created a complicated environment where safe-haven flows clashed with underlying central bank expectations.
The situation today is quite different, with geopolitical tensions having eased considerably. Swiss inflation has since firmed up, with the latest data for March 2026 showing a year-over-year CPI of 1.2%, much closer to the Swiss National Bank’s target. This has taken the prospect of aggressive rate cuts off the table, providing a fundamental support for the Franc that was absent last year.
Meanwhile, the focus for the US Dollar has shifted from a safe-haven asset to a reflection of Federal Reserve policy. With recent US job growth figures from the Non-Farm Payrolls report coming in slightly below expectations at 195,000, market chatter has pivoted towards a potential Fed rate cut later this year. This contrasts sharply with the dollar’s strength during the risk-averse period in 2025.
Given this backdrop, we see reduced market volatility as a key theme for the coming weeks. One-month implied volatility in USD/CHF options has fallen to around 5.5%, a significant drop from the levels above 9% seen during the peak of the crisis in 2025. This environment makes strategies that benefit from range-bound price action, such as selling strangles, more appealing.
Our underlying directional bias is for a weaker USD/CHF, reflecting the divergent paths of the SNB and the Federal Reserve. We are considering buying Swiss Franc call options to position for this potential move. A decisive break below the 0.8800 support level, which has held for most of early 2026, would be a key signal to add to these bearish positions.
