The USD/CHF pair is trading lower around 0.7920 during Friday’s Asian session, weighed down by a weakening US Dollar (USD) amid expectations of two additional Federal Reserve interest rate cuts in 2026. The Fed previously implemented a 25-basis-point (bps) cut at its December 2025 meeting, bringing the target range to 3.50%–3.75%. Throughout 2025, the US central bank reduced rates by a cumulative 75 bps to address a cooling labor market despite persistent inflation.
Markets are currently awaiting US President Donald Trump’s nomination for a new Fed chair to succeed Jerome Powell in May. President Trump indicated the announcement will come “sometime in January,” a move that could steer monetary policy toward lower interest rates. National Economic Council Director Kevin Hassett is seen as the frontrunner, though Trump is also considering former Fed Governor Kevin Warsh. Other potential candidates include current Fed Governors Christopher Waller and Michelle Bowman, as well as BlackRock’s Rick Rieder.
However, minutes from the Federal Open Market Committee’s (FOMC) December meeting revealed a divided outlook. Most participants believed it would be appropriate to pause rate cuts if inflation continues to ease, while some officials argued for holding rates steady for a period following the three cuts in 2025 meant to support the weakening labor market.
Meanwhile, the safe-haven Swiss Franc (CHF) is finding support amid heightened geopolitical tensions, adding downward pressure on the pair. These tensions are fueled by recent exchanges of accusations regarding civilian attacks between Russia and Ukraine over the New Year, alongside persistent US–Venezuela friction.
Adding to Swiss Franc strength, Switzerland’s KOF Economic Indicator rose by 1.7 points to 103.4 in December. This reached its highest level since September 2024 and beat market expectations of 101.4. The improvement was most notably driven by the production side, with manufacturing indicators pointing to a more favorable outlook.
