Swiss Franc strengthens as US Dollar falters after US midterm elections

• A Democratic majority in the US House weighs on the US Dollar, pushing USD/CHF lower.
• US Dollar volatility reflects elevated geopolitical risks surrounding US-Iran tensions and the prospect of a Fed rate rise.
• Swiss inflation reaches 1.5%, bringing forward expectations for an SNB rate rise to early 2027.

At around 0.8170 in Wednesday’s Asian session, USD/CHF has surrendered the previous day’s gains as a weaker US Dollar (USD) puts the pair under pressure. The decline follows Tuesday’s midterm elections, in which Americans voted on control of Congress for the final two years of President Donald Trump’s term. The Democrats’ capture of a majority in the House of Representatives from the Republicans has prompted markets to anticipate possible changes in congressional leadership, alongside renewed uncertainty over the direction of US fiscal policy. According to live figures from Decision Desk HQ, results have been called in 253 of the 435 House seats. Democrats hold 152 seats against the Republicans’ 101, with 218 required for a majority.

Geopolitical developments and monetary policy signals are also in focus across financial markets. With diplomatic efforts still at an impasse, traders are assessing whether President Trump will restart military strikes against Iran. Following reported US airstrikes on Iran’s Qeshm Island, Washington and Tehran are both considering proposals put forward by mediators. Lower energy costs could reduce expectations of aggressive monetary tightening. Even so, the CME FedWatch Tool shows that markets continue to assign a 79% probability to a Federal Reserve interest rate rise in December.

October’s Swiss inflation reading of 1.5%, the highest in nearly three years, has lent domestic support to the Swiss Franc (CHF), adding to the downward pressure on USD/CHF. Higher imported energy costs accounted for most of the increase. While inflation remains inside the Swiss National Bank’s (SNB) 0% to 2% target range, its sharp acceleration has brought forward market expectations for a rate rise, with an increase now anticipated in early 2027.

USD/CHF retreats as UOB casts doubt on a sustained break below support

UOB Group strategists highlight continued volatility in USD/CHF, describing the recent price action as follows: “USD subsequently dropped to a low of 0.8148 and then snapped back up to close at 0.8206 (+0.27%).” In their assessment, the Dollar “fell further today and it could break below 0.8140. However, it is unclear whether it can maintain a foothold below this level,” leaving the pair’s ability to hold below key support in doubt.