Diverging Fed-SNB rate outlooks weigh on Swiss Franc

85% is the market-implied probability of a December Fed rate hike following stronger US inflation data.
Signs of easing geopolitical tensions in the Middle East could weigh on safe-haven US Dollar gains.
0% remains the expected SNB interest rate for next month as inflation stays fully contained.

0.8260 is the approximate USD/CHF level in early European trading on Wednesday. The pair is advancing for a second consecutive day, supported by a firm US Dollar (USD) after the latest US inflation release. That report strengthened expectations of a December rate hike by the Federal Reserve (Fed). The CME FedWatch Tool now puts the probability of an increase next month at 85%.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

October's US Consumer Price Index rose 0.4% month-on-month, above the 0.3% forecast but below September's 0.6% increase. Excluding volatile food and energy prices, core CPI advanced 0.3%, matching the September reading and exceeding the expected 0.2%. The Bureau of Labor Statistics did not publish annual inflation measures for October because of last year's government shutdown.

US inflation is still uncomfortably high, according to Commerzbank. The bank cautioned that “prices are still rising too quickly, even though the increase was somewhat smaller than in September.” It does not regard the latest slowdown in monthly price growth as convincing evidence of a move towards price stability.

Reduced demand for safe havens could nevertheless weigh on the Greenback in the near term, with geopolitical tensions showing signs of easing. Further military action against Iran might be unnecessary, US President Donald Trump indicated. US Secretary of State Marco Rubio expressed a similar view at the G7 meeting. Congressional Democrats, meanwhile, aim 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 price pressures remain contained and the central bank has successfully met its medium-term price stability mandate. Lower oil prices have also reduced inflation risks. Against this backdrop, the SNB is widely expected to leave interest rates at 0% at its next meeting. Financial markets allow for a possible increase by early 2027, whereas most economists place the first hike closer to late 2027.

Technical Outlook:

0.8260 is the USD/CHF reading on the daily chart. As no key moving averages or structural levels are supplied, momentum provides the main guide to the near-term outlook. The 14-day Relative Strength Index (RSI), around 54 after recovering from mid-range readings, points to a slight positive bias. This suggests selling pressure has diminished and buyers are steadily regaining control.

Without clearly identified support levels in the dataset, traders are likely to keep using recent swing lows and intraday price movements as downside reference points. Any recovery, meanwhile, is likely to encounter selling first at earlier reaction highs, for which no numerical levels are given here. At 145.61, the latest FXS Fed Sentiment Index reading sits near the upper end of its recent range. It adds modest support to a constructive dollar backdrop and could help USD/CHF build on its gains if the price clears nearby highs on the daily chart.

Chart Analysis USD/CHF — USD/CHF: Daily Price Chart

8/10 hawkish score: Goolsbee’s ‘real inflation issue’ warning supports Dollar

8/10 was the FXS Speechtracker score for Fed’s Goolsbee, above his historical average of 6.8/10. His markedly more hawkish message highlighted growing concern over persistent price pressures. Describing the latest CPI as “borderline disturbing,” he stressed that services inflation is “not coming down” and that there is “a real inflation issue” the Fed is “going to have to deal with”. Those remarks suggest less tolerance for upside inflation surprises, even with a “steady and stable” labour market. Repeated warnings about inflation becoming embedded in expectations, alongside his statement that “everything is always on the table”, leave scope for renewed tightening or a longer period of restrictive policy. Such a policy backdrop typically favours the Dollar and weighs on risk-sensitive currencies.

A 1.69-point rise took the FXS Fed Sentiment Index to 145.61, placing the speech firmly in hawkish territory and comfortably above the neutral 100 level. Together with the high FXS Speechtracker score, the index increase should support expectations that restrictive policy will persist. This may 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.)

Swiss Franc: Key Questions Answered

Swiss Franc: Main Drivers of Its Value

Switzerland's official currency, the Swiss Franc (CHF), ranks among the world's ten most actively traded currencies. Trading volumes far exceed the size of the Swiss economy. Broad market sentiment, domestic economic conditions and Swiss National Bank (SNB) decisions are among the influences on its value. From 2011 to 2015, the Swiss Franc was pegged to the Euro (EUR). The abrupt removal of that peg sent the Franc up by more than 20%, triggering market turmoil. Although the peg no longer applies, CHF movements remain closely linked to those of the Euro because Switzerland's economy relies heavily on the neighbouring Eurozone.

Swiss Franc: The Basis for Its Safe-Haven Status

During periods of market stress, investors tend to buy the Swiss Franc (CHF), giving it safe-haven status. That appeal reflects Switzerland's perceived standing: economic stability, a strong export industry, substantial central bank reserves and a longstanding policy of neutrality in global conflicts. These attributes make its currency attractive to investors seeking to avoid risk. In turbulent conditions, CHF is therefore likely to appreciate against currencies regarded as riskier investments.

Swiss National Bank Decisions Shape Franc Returns

Four times a year, once each quarter, the Swiss National Bank (SNB) meets to set monetary policy. This is less frequent than at other major central banks. Its objective is an annual inflation rate below 2%. If inflation exceeds that target, or is forecast to do so in the foreseeable future, the SNB seeks to curb price growth by increasing its policy rate. Higher rates generally support the Swiss Franc (CHF): the resulting rise in yields makes Switzerland more attractive to investors. Lower rates, by contrast, usually put downward pressure on CHF.

Swiss Economic Data Guide Franc Valuations

Investors use Switzerland's macroeconomic releases to gauge the economy's health, and those figures can move the Swiss Franc (CHF). Although the economy is generally stable, abrupt shifts in growth, inflation, the current account or central bank currency reserves can trigger CHF movements. Strong growth, low unemployment and robust confidence usually support the currency. Data signalling a loss of economic momentum, on the other hand, are likely to weaken CHF.

Eurozone Monetary Policy: Implications for the Swiss Franc

Switzerland's small, open economy relies heavily on economic conditions in the neighbouring Eurozone. The wider European Union is both its leading economic partner and an important political ally. Stability in Eurozone macroeconomic conditions and monetary policy is consequently crucial for Switzerland and the Swiss Franc (CHF). Given that dependence, some models put the correlation between movements in the Euro (EUR) and CHF at more than 90%, approaching a perfect correlation.