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Swiss franc rises as dollar softens after hawkish Fed remarks
Markets have shifted Fed rate odds, with CME FedWatch pricing nearly a 57.5% chance of a 25 bps hike in September.
The Swiss franc edged higher versus the US dollar as the USD weakened following hawkish comments tied to Federal Reserve Chair Kevin Warsh’s remarks at Jackson Hole. FXStreet reports USD/CHF held losses after modest gains the prior day, trading around 0.8090 during Asian hours on Monday.
FXStreet said the market reaction reflected a view that the Fed would only move to a hike if August CPI and PPI data surprise to the upside, which Goldman Sachs chief economist Jan Hatzius expects is unlikely. The outlet also noted Warsh’s emphasis that the Fed needs confidence underlying inflation is on track toward the 2% PCE goal, alongside comments that financial conditions remain not restrictive and credit and loan markets show few signs of policy restraint.
With the next Fed decision scheduled for September 15 to 16, markets adjusted expectations quickly. According to the CME FedWatch tool cited by FXStreet, traders are now pricing in nearly a 57.5% chance of at least a 25 basis point hike next month, up from 35% before Warsh’s speech.
On the Swiss side, FXStreet said the Swiss National Bank kept its key policy rate at 0% and is projected to maintain it through 2027, reiterating it is ready to intervene to limit excessive franc appreciation. The outlet added that most economists do not expect a hike until early 2028, while BBH expects Switzerland’s August inflation to stay subdued, supporting the SNB’s ability to remain on hold.