In mid-May 2025, the U.S. dollar began to edge higher against the Swiss franc (USD/CHF), prompting speculation that the Swiss National Bank (SNB) may soon adopt a more dovish stance. At the same time, unexpectedly hot U.S. inflation data is reshaping expectations around Federal Reserve policy. As major central banks begin to show divergence in their policy paths, the tug-of-war between these two traditional safe-haven currencies is becoming a quiet yet powerful force in global FX markets.

Switzerland’s April inflation rate dropped to 0%—the lowest in over four years—well under the SNB’s target range of 0% to 2%. The downward pressure comes largely from the continued strength of the Swiss franc, which has reduced import prices. In response, SNB Vice Chairman Martin Schlegel has stated that if inflation remains subdued, a return to negative interest rates is on the table. The benchmark rate has already dropped from 1.75% to 0.25%, and markets are widely expecting another 25-basis-point cut at the June 19 meeting—potentially bringing rates back to zero or even below by year-end.

Beyond rate policy, the SNB may step into the FX market to curb further franc appreciation, especially if it threatens the competitiveness of Swiss exports. The SNB has previously intervened to manage currency strength, and while effective in the short term, such action would highlight the contrast between Switzerland’s easing bias and other central banks’ tightening cycles, potentially triggering shifts in global capital flows.

Meanwhile in the U.S., consumer inflation expectations are rising—fast. According to the University of Michigan’s May survey, Americans now expect inflation to hit 7.3% over the next year, the highest since 1981 and well above forecasts. This spike has tempered hopes for aggressive Fed rate cuts. Currently, markets see an 80%+ chance the Fed will hold steady in May, and probability of a September cut is slipping as well.

This macro backdrop has helped the dollar strengthen against the franc, reflecting a reassessment of central bank trajectories. Technically, a break above 0.8450 could pave the way to 0.8550, while falling below 0.8250 could signal renewed weakness. Some analysts note that the franc’s appeal as a safe-haven has slightly declined amid better U.S.-China trade sentiment—but stress that in times of global uncertainty, the Swiss franc still draws investors.

Markets now turn their focus to two pivotal events in mid-June: the SNB’s interest rate decision—particularly whether it will resume FX interventions and lean into negative rates—and the Fed’s policy statement and economic projections. If U.S. inflation remains resilient while Switzerland eases policy further, widening yield differentials could push USD/CHF even higher.

In short, the current FX trend reflects more than just diverging economic fundamentals—it shows the real-time impact of global monetary policy fragmentation. With Switzerland battling disinflation and the U.S. still fighting inflation, their policy divergence is already reshaping currency flows. For investors, the upcoming June policy meetings will be critical in charting where the currency winds blow next.