Dollar Strengthens as Fed Rate Cut Bets Rise, Swiss Economy Shows Weakness

The USD to CHF exchange rate is displaying upward momentum on Friday, hovering near 0.8060 with a gain of 0.15% recorded at the time of analysis. This movement reflects a broader weekly climb for the pair, driven by persistent softness in the broader US Dollar Index (DXY), which is approaching its poorest weekly showing since mid-July.

Fed Rate Cut Expectations Drive Dollar Dynamics

Market participants are increasingly positioning for significant monetary easing from the Federal Reserve over the coming year. Recent CME FedWatch tool data reveals a substantial shift: the probability of a 25-basis-point rate reduction in December has climbed to 85%, a remarkable surge from just under 40% a month prior. This repricing reflects the accumulative effect of soft US Retail Sales figures released this week, coupled with recent dovish messaging from multiple Fed policymakers.

The political dimension adds another layer to easing expectations. Discussion within policy circles about Kevin Hassett potentially succeeding Jerome Powell next May has amplified market bets on an extended easing phase through 2026. Despite Friday’s rebound in Treasury yields providing some support to the dollar, these fundamental expectations continue to cap any substantial USD strength.

Swiss Economic Headwinds Pressure the Franc

On the Swiss side, the Franc finds itself without meaningful support following disappointing economic releases. Third-quarter data showed Swiss Gross Domestic Product (GDP) contracting 0.5% on a quarterly basis, exceeding economists’ expectations for a 0.4% decline. Year-over-year growth has decelerated dramatically to just 0.5%, a sharp departure from the previously reported 1.3% figure.

The economic weakness is expected to keep the Swiss National Bank (SNB) cautious on policy tightening. Analysts project the SNB may maintain its policy rate at 0.00% potentially extending into 2027. A solitary bright spot emerged from the KOF Leading Indicator, which rose to 101.7 from 101.03, marginally surpassing forecasts—yet this improvement cannot offset the broader deterioration signal.

Currency Strength Hierarchy

Examining broader currency performance reveals a differentiated landscape. The US Dollar demonstrated the strongest positioning against the Euro today, while the Japanese Yen also appreciated meaningfully. Among major currency pairs, the USD to CHF dynamic continues favoring dollar appreciation, though sensitivity remains heightened to any shifts in Federal Reserve rate expectations.

The pair’s trajectory hinges on whether macroeconomic conditions deliver surprises that would necessitate Fed policy recalibration. Until such developments materialize, the fundamental backdrop appears tilted toward continued USD/CHF upside potential.