USD/CHF holds modest gains near two‑week highs ahead of the Fed’s policy announcement, while the franc remains a low‑yield funding currency.

USD/CHF is consolidating modest gains on Wednesday, trading around 0.8303 – close to a two‑week high – as markets brace for the Federal Reserve’s monetary policy decision at 18:00 GMT. The pair has stayed on the front foot for four straight sessions, reflecting traders’ preference for higher‑yielding currencies and keeping the Swiss franc under pressure.

Fed expectations and market positioning

• The Fed is widely expected to keep its policy rate unchanged at 3.75%‑4.00% after a 25‑basis‑point hike in September.
• CME FedWatch Tool shows an 85% probability of a 25‑basis‑point hike in December, based on the upcoming statement and Chair Kevin Warsh’s press conference.
• US Dollar Index (DXY) hovers near 102.40, also near a two‑week high, supporting USD‑CHF momentum.

Underlying drivers of a hawkish stance

• Middle‑East energy shocks could keep US inflation above the 2% target for longer, reinforcing a hawkish tone.
• Brown Brothers Harriman notes a likely 9‑3 vote to hold, with dissenters possibly pushing for a hike, keeping December rate‑rise scenarios alive.
• Robust US economic activity and rising price pressures further back the Fed’s bias toward tighter policy.

Swiss franc fundamentals

• The Swiss National Bank’s policy rate stays at 0%, making the franc a low‑yield funding currency for carry trades.
• Inflation in Switzerland remains within the 0%‑2% target range, reducing immediate pressure for a rate hike.
• CHF was strongest against the New Zealand dollar today, but overall it lags behind higher‑yielding peers.

What traders are watching next

• The Fed’s policy statement and Chair Warsh’s remarks for clues on a possible December hike.
• US inflation data and oil price movements, which could influence the Fed’s outlook.
• Any unexpected move by the SNB that could shift the CHF’s carry‑trade appeal.

Related news

• Fed holds rates steady, bitcoin barely moves as December hike looms
• Gold slips toward $4,000 as oil above $100 clouds Fed outlook
• Obr downgrades uk growth forecast for 2027 despite healey budget
• Bitcoin and gold hold near key levels ahead of Fed decision

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This article is compiled from international market news for information only. It is not investment advice.