USD/CHF rises above 0.8250 as traders expect Fed to leave rates unchanged

• USD/CHF is gaining ground as investors adopt a cautious stance ahead of the Federal Reserve's interest rate decision.
• All eyes are on Fed Chair Jerome Powell's comments, particularly against the backdrop of rising tariff tensions.
• The Swiss Franc could come under pressure, with markets fully pricing in a SNB's 25 basis-point rate cut in June.

USD/CHF halts its three-day losing streak, hovering around 0.8250 during Wednesday's European session as the US Dollar (USD) gains traction. The Greenback is strengthening as markets adopt a cautious tone ahead of the Federal Reserve's interest rate announcement, scheduled for later in the North American session.

The Fed is widely anticipated to leave its benchmark rate unchanged at 4.25-4.50% for a third straight meeting in May 2025, balancing signs of easing inflation with a resilient labor market and increasing uncertainty around US trade policy. Market participants are closely watching Fed Chair Jerome Powell's remarks, especially amid escalating tariff tensions and renewed political pressure from President Trump urging rate cuts.

In a related development, US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are set to meet Chinese Vice Premier He Lifeng in Geneva this weekend. This marks the first top-level engagement since the US ramped up tariffs, fueling global trade friction. China's Ministry of Commerce confirmed attendance after reviewing Washington's proposals, considering domestic industry feedback and broader global sentiment.

Despite a firmer USD, the Swiss Franc (CHF) has also found support, bolstered by safe-haven flows as investors react to volatile US trade and fiscal policy signals. Nonetheless, the CHF may face headwinds as markets are fully pricing in a 25 basis-point rate cut by the Swiss National Bank (SNB) at its June meeting, which would lower the policy rate from 0.25% to 0%. Some analysts even suggest a return to negative interest rates is possible.

On the data front, the SNB's foreign exchange reserves declined for the third month in a row, falling to CHF 702.895 billion in April 2025--the lowest level since August 2024--from CHF 725.551 billion in March. Meanwhile, the Swiss unemployment rate dipped to a non-seasonally adjusted 2.8% in April, the lowest in four months, down from 2.9% in the two preceding months.