USD/CHF gains as Fed signals slower easing, US-China trade relations improve

• The US Dollar consolidates its gains after the Federal Reserve's hawkish rate cut.
• The Federal Reserve signals a slower pace of easing, trimming odds of a December cut.
• Improved US-China relations offer moderate support to risk sentiment.

USD/CHF trades higher around 0.8000 on Thursday, up 0.20% for the day. The US Dollar (USD) finds support after the Federal Reserve (Fed) delivered a widely expected 25 basis-point rate cut to a range of 3.75%-4.00%, while signaling a slower pace of future easing.

Fed Chair Jerome Powell emphasized that a further rate reduction in December is "far from a foregone conclusion", prompting markets to scale back expectations for a near-term cut. According to data from the CME FedWatch tool, the chances of a December rate cut fell to 70% after the policy meeting. Analysts from Brown Brothers Harriman noted that the combination of a hawkish tone and a divided Federal Open Market Committee (FOMC) vote supports the case for a firmer US Dollar.

At the same time, the announcement of a one-year trade truce between the United States (US) and China has improved investor sentiment. The two countries agreed to roll back some tariffs and ease export controls, with China pledging to resume key agricultural imports and allow the free export of rare earths to the US. This breakthrough reduces global trade tensions, which had weighed on growth prospects throughout the year.

Meanwhile, the Swiss economy has shown tentative signs of improvement. The October ZEW Expectations Index rebounded sharply to -7.7 from -46.4 in September, while the KOF Leading Indicator rose to 101.3 from 98.0, exceeding consensus forecasts.