OPTIONS: Expiries for Oct22 NY cut 1000ET (Source DTCC)

• Despite a brief flurry above 0.9400 in August, EURCHF has subsequently reverted to trade within a very familiar range between 0.93-94 that has been broadly respected since April. Since the June SNB meeting, the nominal and real effective exchange rates have continued to strengthen, albeit to a much lesser extent than in Q2 (i.e. March – June).
• USDCHF printed a cycle low of 0.7829 in the aftermath of the Fed, the lowest level since the removal of the peg in 2015, and this remains the immediate support level to note. CHFJPY has remained in its steady uptrend, printing fresh all-time highs at 187.11 on Friday.
• The SNB is expected to hold rates at 0.00% on Thursday, with only 1/24 surveyed economists expecting a cut. Continued positive inflation prints should skew near term policy expectations away from further policy easing. The policy statement is likely to re-iterate that the SNB "remains willing to be active in the foreign exchange market as necessary."
• SNB Chair Schlegel announced that from the September meeting, the bank will start publishing meeting summaries four weeks after the decision.
• SNB officials have clearly indicated that there is a higher hurdle to reimpose negative rates given the undesirable side effects, according to MUFG. There is also optimism after recent trade talks with the US to secure a deal lowering the tariff rate. As a result, MUFG are not expecting this week’s SNB meeting to weaken the Swiss franc.

The implied probability of a US government shutdown on October 1 spiked to nearly 70% after Congress departed for a week-long recess without a plan to fund the federal government. On Friday, the House passed a ‘clean’ CR to punt funding through November 21. Speaker Johnson (R-LA) then recessed the House until at least October 1, closing the door to new negotiations before the September 30 deadline. 

• Senate Democrats blocked the House bill, reiterating a CR must permanently extend Obamacare subsidies, among other partisan demands. Senate Majority Leader Thune (R-SD) is expected to delay a second CR vote until September 29, exerting as much pressure on Democrats as possible.
• Senate Minority Leader Schumer (D-NY) and House Minority Leader Jeffries (D-NY) told President Trump in a letter it is his "obligation" to meet with Democrats to "reach an agreement to keep the government open...” Punchbowl notes a Trump meeting could be a ‘risk’ for GOP leadership, as many Hill Republicans also want Obamacare subsidies extended.
• Republicans likely have the upper hand in this week's messaging blitz as Democrats regularly passed CRs while in control of Congress, slating GOP conservatives for leveraging shutdown threats. However, Schumer and Jeffries are responding to a Democratic base that wants more assertive action to counter the Trump administration.
• Punchbowl notes one unlikely pathway out of this stalemate, floated by figures in both parties, “is to try to enact a stopgap funding bill into 2026 instead and attach the enhanced Obamacare tax credits onto that.”

Figure 1: Government Shutdown by October 1

Source: Polymarket