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USD/CHF rises to about 0.8110 as oil lifts yields and rate fears
CME FedWatch shows nearly 52% odds of a 25 basis point September Fed hike, up from 44.4% a day earlier, helping push USD/CHF higher.
USD/CHF extended gains for a second straight day, trading around 0.8110 in early European trading Tuesday, as the US dollar erased intraday losses. FXStreet reports the move was tied to a sharp rally in crude oil driven by heightened geopolitical tensions.
The higher energy prices have pushed Treasury yields upward, which has stoked concerns the Federal Reserve may need to hike rates sooner than expected. Investors are focusing on this week’s inflation data for clearer policy signals, with the CME FedWatch Tool pricing nearly 52% probability of a 25 basis point rate hike in September, up from 44.4% a day ago.
OCBC analysts said the threshold for a September Fed move remains high, arguing that core CPI would need to print at 0.3% month over month or higher in July, above the 0.2% consensus forecast, to materially lift expectations. They also noted that a range-bound USD and a constructive risk backdrop could continue to support carry trades despite ongoing volatility in oil markets.
FXStreet adds that oil prices had eased on hopes the Strait of Hormuz could reopen, but it said Iran’s stated conditions for Washington imply any near term boost to supply may be limited. Separately, Cleveland Fed President Beth Hammack told Yahoo Finance that multiple rate hikes may be needed to bring inflation under control, with the upcoming Consumer Price Index report described as a key test for the Fed’s path. Switzerland’s inflation cooled to a four month low of 0.4% year over year in July from 0.5% in June, and the Swiss National Bank is widely expected to keep rates on hold through year end.
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