USD/CHF climbs to 0.8260 as hotter-than-expected US inflation data and hawkish Fed commentary contrast with the SNB's expected steady policy stance.
USD/CHF has extended gains to around 0.8260 for a second day after October CPI beat forecasts (headline 0.4% vs 0.3% expected, core 0.3% vs 0.2%), lifting the odds of a December Fed rate hike to 85% per CME FedWatch. Meanwhile the SNB is widely expected to keep rates at 0%, widening the policy divergence. Easing geopolitical tensions could reduce safe-haven demand for the franc, though that also cuts both ways for the dollar.
The October CPI print of 0.4% m/m (core 0.3%) beat forecasts and cemented an 85% market-implied probability of a December Fed hike, while Goolsbee's hawkish rhetoric (Speechtracker 8/10) pushed the FXS Fed Sentiment Index to 145.61. This hawkish mix supports the dollar near term. Easing safe-haven demand from cooling Iran tensions is the main offset.
SNB Chairman Schlegel said price pressures remain contained and the bank has met its mandate, with the SNB widely expected to hold rates at 0% at its upcoming meeting. Combined with falling oil prices moderating inflation and easing geopolitical tensions reducing safe-haven demand, the franc loses support versus the hawkish Fed.
The USD/CHF pair extended gains for a second day, trading near 0.8260 as October US CPI data exceeded forecasts. With headline inflation at 0.4% and core at 0.3%, markets now price an 85% probability of a Federal Reserve rate hike in December. Conversely, the Swiss National Bank is expected to maintain its 0% policy rate, widening the interest rate divergence between the two currencies.
A stronger-than-expected US inflation report pushed the chance of a December Fed rate hike to about 85%, while the Swiss National Bank is expected to leave rates unchanged at 0%, favoring the dollar over the franc.
If geopolitical tensions keep easing, reduced safe-haven demand could work against the dollar, and any surprise SNB hawkishness could lift the franc.
The hotter October US inflation report and hawkish Fed commentary have lifted expectations of a December rate hike to 85%.
The SNB is expected to keep rates at 0% while the Fed may hike in December, and easing geopolitical tensions are reducing safe-haven demand for the franc.