Swiss Franc weakens as Fed-SNB interest rate outlooks diverge

• Stronger US inflation figures have prompted markets to price in an 85% probability of a Fed rate increase in December.
• Signs of easing geopolitical tensions in the Middle East could weigh on the US Dollar’s safe-haven gains.
• With inflation fully contained, the SNB is expected to leave interest rates unchanged at 0% next month.

The latest US inflation report has bolstered expectations of a December rate increase by the Federal Reserve (Fed), keeping the US Dollar (USD) firm. Against that backdrop, USD/CHF is advancing for a second successive day, changing hands at around 0.8260 in early European trading on Wednesday. The CME FedWatch Tool now puts the probability of a rate rise next month at 85%.

October’s US Consumer Price Index rose by 0.4% month on month, exceeding the 0.3% forecast but easing from September’s 0.6% increase. Excluding volatile food and energy prices, core CPI advanced by 0.3%, unchanged from September’s pace and above expectations of 0.2%. Because of last year’s government shutdown, the Bureau of Labor Statistics did not publish annual inflation measures for October.

Commerzbank considers US inflation to be uncomfortably high, emphasising that “prices are still rising too quickly, even though the increase was somewhat smaller than in September.” The bank’s assessment is that the recent slowdown in monthly price growth has yet to provide convincing evidence of a move towards price stability.

A reduction in safe-haven demand could nevertheless weigh on the Greenback in the near term, as geopolitical tensions appear to be subsiding. At the G7 meeting, US Secretary of State Marco Rubio echoed US President Donald Trump’s indication that additional military action against Iran might be unnecessary. At the same time, Congressional Democrats are seeking to use the approaching government funding deadline to press the administration towards a peaceful diplomatic resolution.

In Switzerland, Swiss National Bank (SNB) Chairman Schlegel said inflationary pressures remain contained and the central bank has met its medium-term price stability mandate. Falling oil prices have also reduced inflation risks, leaving the SNB widely expected to maintain interest rates at 0% at its next meeting. Financial markets allow for a possible rate rise by early 2027, whereas most economists anticipate the first increase nearer to late 2027.

Technical Analysis: USD/CHF Momentum Turns Modestly Positive

On the daily chart, USD/CHF stands at 0.8260, with momentum providing the main near-term guide in the absence of specified key moving averages or structural levels. Having recovered from mid-range readings, the 14-day Relative Strength Index (RSI) sits around 54, giving a modestly positive signal. This suggests selling pressure has diminished and buyers are slowly reasserting themselves.

As the dataset does not identify clear support levels, recent swing lows and intraday price movements are likely to remain traders’ reference points on the downside. Any recovery would initially be expected to encounter selling at previous reaction highs, for which no numerical levels are given here. At 145.61, the latest FXS Fed Sentiment Index reading is close to the upper end of its recent range, lending modest support to a favourable dollar backdrop. That could assist further USD/CHF gains if the pair clears nearby highs on the daily chart.

Dollar Gains as Goolsbee’s Hawkish Remarks Highlight ‘real inflation issue’

An FXS Speechtracker score of 8/10, against a historical average of 6.8/10, highlights the markedly more hawkish tone of the Fed’s Goolsbee and his growing concern over persistent price pressures. Describing the latest CPI as “borderline disturbing,” services inflation as “not coming down,” and the situation as “a real inflation issue” that the Fed is “going to have to deal with” points to reduced tolerance for upside inflation surprises, even with a “steady and stable” jobs market. His repeated warnings about inflation becoming entrenched in expectations, alongside the statement that “everything is always on the table”, leave scope for fresh tightening or a prolonged restrictive stance. Such a policy backdrop is generally favourable for the Dollar and unfavourable for currencies sensitive to risk sentiment.

A 1.69-point increase took the FXS Fed Sentiment Index to 145.61, placing the speech firmly in hawkish territory and comfortably above the neutral level of 100. Together with the high FXS Speechtracker score, the index’s rise should support expectations that restrictive policy will persist. It may also continue to favour the Dollar against the Euro and Yen over the near term.

(The technical analysis of this story was written with the help of an AI tool. Know more.)