USD/CHF rises amid easing trade tensions, SNB policy support

• The US Dollar regains ground as trade tensions between Washington and Beijing ease.
• Softer US inflation data reinforce expectations of further Federal Reserve rate cuts.
• The Swiss Franc remains supported after the Swiss National Bank ruled out additional monetary easing.

USD/CHF trades around 0.7960 on Monday at the time of writing, up 0.10% on the day. The US Dollar (USD) is recovering as markets welcome growing optimism that the United States (US) and China could finalize a trade deal during the upcoming meeting between Donald Trump and Xi Jinping in South Korea later this week.

US Treasury Secretary Scott Bessent said on Sunday that the threat of imposing 100% tariffs on Chinese goods is now "off the table." He added that Beijing has agreed to make substantial purchases of US soybeans and to defer its new rare-earth export controls for one year. These developments have lifted overall market sentiment and helped the US Dollar to recover.

However, the Greenback's upside could remain limited as investors anticipate further monetary easing from the Federal Reserve (Fed). According to the CME FedWatch tool, markets are pricing in a nearly 97% chance of a 25-basis-point (bps) interest rate cut on Wednesday and a 96% chance of another reduction in December.

Data from the US Bureau of Labor Statistics (BLS) showed on Friday that the Consumer Price Index (CPI) rose 3% YoY in September, following a 2.9% increase in August and slightly below market expectations of 3.1%. On a monthly basis, inflation increased by 0.3%, compared to 0.4% in the previous month, confirming a moderation in price pressures.

In Switzerland, the Swiss Franc (CHF) remains supported after the release last Thursday of the Swiss National Bank's (SNB) September meeting minutes. The SNB downplayed deflation risks and dismissed the idea of returning to negative interest rates, noting that its current policy stance remains sufficiently accommodative. This cautious but firm tone helps limit CHF weakness against USD.

Investors now turn their attention to upcoming US data and the Fed's next policy meeting on Wednesday, which could confirm the path toward further rate cuts. In the meantime, the prospect of a US-China trade breakthrough continues to boost market sentiment, keeping USD/CHF slightly higher for the day.