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USD/CHF holds near 0.8100 as Swiss inflation cools
Swiss CPI slowed to 0.4% in July, reinforcing expectations that the SNB can keep rates at 0.0% for longer, a headwind for the franc.
FXStreet reports that USD/CHF was little changed after two sessions of gains, trading around 0.8100 during Tuesday’s Asian hours. The move is being tied to a cooling in Swiss inflation, with Swiss CPI rising 0.4% in July, down from 0.5% in the prior month and its lowest level in four months. FXStreet says the slowdown points to limited pass-through from higher geopolitical energy prices, contrasting with the Swiss National Bank’s expectation of only a modest near-term inflation pickup after it held policy rates at 0.0%.
According to strategists at Brown Brothers Harriman, the lack of inflationary pressure keeps the SNB in a position to maintain borrowing costs at 0.00% for some time, which remains a drag on the Swiss franc. FXStreet adds that CHF is the weakest performing G10 currency so far this quarter, while price action in USD/CHF stays muted as the US dollar stabilizes amid diplomatic uncertainty.
FXStreet also notes that market expectations for the US are shifting after the Federal Reserve held rates steady in July, with CME FedWatch showing about a 65% probability of a 25 basis point hike at the September meeting. Meanwhile, the SNB is expected to keep rates unchanged through year-end, with any additional rate cuts viewed as a contingency plan rather than the base case.