Swiss Franc holds firmer after SVME PMI data

• October’s SVME PMI climbed to 56.7, exceeding forecasts for an unchanged reading of 55.3.
• Diplomatic initiatives in the Middle East curbed safe-haven demand and weighed on the US Dollar, although concerns over US-Iran conflict persisted.
• Resilient US economic and inflation figures have prompted traders to assign a 75% probability to a December rate increase.

Following the release of domestic economic figures, the Swiss Franc (CHF) retains its gains, keeping USD/CHF under pressure. Having recorded a modest advance in the previous session, the pair is trading lower around 0.8220  during Monday’s European session.

October’s SVME Purchasing Managers’ Index advanced to 56.7, rather than holding at 55.3 as forecast. Meanwhile, Swiss Real Retail Sales grew by 1.6% year on year in September, below the 3% market forecast and the previous reading of 3.9%, which had been revised from 3.2%.

Reduced demand for safe havens is weighing on the US Dollar (USD), pulling USD/CHF lower as diplomatic initiatives to resolve the Middle East conflict continue. Concerns nevertheless persist that the US could resume military action against Iran. In a third consecutive day of talks, Qatari and Iranian officials continued working towards an agreement to bring the war to an end before the US midterm elections.

Growing expectations of a Federal Reserve rate increase could, however, help the US Dollar recover. Recent US macroeconomic releases have indicated a resilient economy and persistent inflation, reinforcing those expectations. According to the CME FedWatch Tool, traders now assign roughly a 75% probability to a December rate rise.

Attention now turns to forthcoming releases, notably the US Nonfarm Payrolls (NFP) report and the ISM manufacturing and services figures. Several Federal Reserve officials are also due to speak during the week, with their comments expected to provide further insight into the central bank’s monetary policy outlook.