USD/CHF rallies around 0.8980 as USD rebounds strongly

• USD/CHF reverses a majority of Friday's losses as the US Dollar bounces back strongly.
• The US Dollar recovers as traders expect the Fed to hold interest rates steady in January.
• The SNB is expected to reduce interest rates further in 2025.

The USD/CHF pair recovers a majority of Friday's losses and surges to near 0.8985 in Monday's North American session. The Swiss Franc pair strengthens as the US Dollar (USD) bounces back strongly amid firm expectations that the Federal Reserve (Fed) will approach interest rate cuts cautiously in 2025.

The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, rebounds sharply to near 108.20.

Fed policymakers have taken a cautious approach to interest rate cuts. They believe that progress in disinflation has stalled and labor market conditions are not as bad as they anticipated in September. Additionally, uncertainty over President-elect Donald Trump's incoming policies has compelled officials to slow down the policy-easing cycle.

The Latest Fed dot plot showed that officials collectively see Federal Fund rates heading to 3.9% in 2025. According to the CME FedWatch tool, traders are confident that the Fed will leave interest rates unchanged in the range of 4.25%- 4.50% for the first policy meeting of 2025 in January.

Going forward, investors will focus on the United States (US) Durable Goods Orders data for November, which will be released on Tuesday. Economists expect the Durable Goods Orders to have declined by 0.4% against a 0.3% increase in October.

Meanwhile, the Swiss Franc (CHF) weakens across the board. The Swiss National Bank (SNB) is expected to ease monetary policy further amid fears of inflation undershooting the central bank's target of 2%. The SNB has already reduced interest rates by 125 basis points (bps) this year to 0.5%.