US Dollar slips against Swiss Franc as Fed rate cut bets grow, Swiss GDP shrinks

• The US Dollar slips against the Swiss Franc, pressured by rising expectations of Fed rate cuts.
• Markets assign nearly an 85% chance to a 25-basis-point cut next week.
• In Switzerland, the GDP contraction strengthens expectations of a prolonged SNB policy pause.

USD/CHF trades lower on Monday, around 0.8010 at the time of writing, down 0.25% on the day. The pair comes under pressure from a weakening US Dollar (USD) as investors increasingly price in additional monetary easing from the Federal Reserve (Fed). Recent US macroeconomic data and cautious comments from several policymakers have reinforced market expectations for a 25 basis points reduction at next week’s policy meeting.

Investors are reacting to signs of a cooling US economy, combined with dovish signals from Federal Reserve officials. According to the CME FedWatch tool, markets now assign close to an 85% chance of a 25 bps cut.

In addition, speculation surrounding leadership changes at the Fed is adding further pressure on the US Dollar. Kevin Hassett, seen as a leading candidate to replace Chair Jerome Powell, has long advocated for easier monetary policy, fuelling expectations of lower rates in 2026. The US Dollar Index (DXY), which falls 0.3% to around 99.15, reflects this trend.

In Switzerland, the Swiss Franc (CHF) lacks momentum despite USD softness, weighed down by a series of disappointing economic indicators. Third-quarter Gross Domestic Product (GDP) contracted by 0.5% QoQ, worse than the expected 0.4% fall. According to Commerzbank, this marks the first negative growth reading since early 2023, largely driven by the impact of US tariffs on Swiss exports. The bank notes, however, that a preliminary agreement between Bern and Washington could lead to improved figures in the coming months.

Still, the weak GDP confirms a marked slowdown in the Swiss economy, reinforcing expectations that the Swiss National Bank (SNB) may keep its policy rate at 0.00% potentially through 2027, according to several analysts. The slight improvement in the KOF Leading Indicator, up to 101.7, does little to alter the broader picture.

In this environment, even if the Swiss Franc is not fully benefiting from its safe-haven status, the US Dollar’s correction continues to weigh on USD/CHF, consistent with an increasingly accommodative monetary outlook in the United States (US).