USD/CHF reached 0.8286 as monetary policy divergence between the Fed and the SNB, combined with risk-on sentiment, fuels a bullish trend for the Greenback.
The pair has already jumped over 1% to 0.8286 on two-week highs after hotter-than-expected US CPI cemented a December Fed hike, while the SNB stays at 0%. Fed officials Paulson and Logan calling for more increases, and 12% odds of a 50bp December hike priced, keep the divergence trade favouring USD. Strong momentum argues for more upside, though resistance at 0.8295-0.8313 may cap gains.
Hotter-than-expected US CPI released Tuesday has markets practically discounting a Fed rate hike in December, with a 12% chance of a 50bp move priced. Philadelphia Fed's Paulson and Dallas Fed's Logan both called for more tightening on Wednesday, keeping the dollar stronger against all majors, strongest of all versus the franc (0.41%).
The franc is the weakest major currency today, down 0.41% against the dollar, crushed by risk-on appetite and monetary policy divergence: the SNB is expected to keep its benchmark rate at 0% for the foreseeable future while the Fed is set to hike in December. This unfavourable rate gap is likely to keep the franc under pressure.
The US Dollar climbed to two-week highs against the Swiss Franc, gaining 0.41% on Wednesday as markets price in a December Federal Reserve rate hike. Following hotter-than-expected US CPI data, Fed officials Anna Paulson and Lorie Logan signaled the need for further tightening, while the Swiss National Bank maintains its 0% benchmark rate.
US inflation came in hotter than expected on Tuesday, and Fed officials signaled further rate hikes in December, while the Swiss National Bank remains at 0% — this divergence plus risk-on appetite is lifting the dollar against the franc.
Resistance sits at 0.8295-0.8313, then 0.8350 and 0.8395; support is at 0.8248, then 0.8225 and 0.8174.
Hotter-than-expected US inflation and Fed officials arguing for further rate hikes, which have made a December Fed increase the market's base case.
The SNB is expected to keep rates at 0% while the Fed may hike in December, and risk-on markets reduce demand for the safe-haven franc.