• The US Dollar trades flat against the Swiss Franc as USD strength is balanced by CHF safe-haven demand.
• Inflation data reinforce the case for a near-term pause in monetary policy by the US central bank.
• Political and geopolitical risks, however, continue to underpin the Swiss Franc’s safe-haven appeal.

USD/CHF trades around 0.8010 on Wednesday, virtually unchanged on the day at the time of writing. The pair draws mild support from the US Dollar (USD) after US inflation data were released broadly in line with market expectations.

Figures published by the Bureau of Labor Statistics showed that the Consumer Price Index (CPI) rose by 2.7% YoY in December, matching both the previous reading and market forecasts. Core inflation, which excludes the more volatile food and energy components, came in at 2.6% YoY, missing expectations for an uptick to 2.7%. On a monthly basis, headline inflation increased by 0.3%, while the core measure rose by 0.2%.

These figures strengthen the view that the Federal Reserve (Fed) is likely to keep interest rates unchanged at its upcoming meeting. Market pricing continues to suggest that the first rate cut is unlikely before mid-year, providing fundamental support to the US Dollar against the Swiss Franc (CHF). In this context, investors are now turning their attention to upcoming US releases, including Retail Sales and the Producer Price Index (PPI), to further assess the outlook for the US economy.

At the same time, the political backdrop in the United States (US) and ongoing geopolitical tensions remain a potential source of support for safe-haven currencies, such as the CHF. Concerns surrounding the independence of the Federal Reserve, along with rising tensions in the Middle East, continue to underpin demand for the Swiss Franc. This environment is limiting the upside in USD/CHF, despite the recent resilience of the US Dollar, as investors continue to balance yield considerations against the need for safety.