The USD/CHF pair declined by approximately 0.50%, trading near 0.9080 during European hours on Thursday. The weakness in the US Dollar (USD) contributes to the pair’s depreciation, as the US Dollar Index (DXY) extends losses for the third consecutive session, trading around 107.70. Market participants await the release of the US Producer Price Index (PPI) inflation data later in the day for further direction.
On Wednesday, the US Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 3.0% year-over-year in January, surpassing expectations of 2.9%. Core CPI, which excludes volatile food and energy prices, climbed to 3.3%, exceeding the forecast of 3.1%. Monthly inflation figures also increased, with headline CPI accelerating to 0.5% from 0.4% in December and core CPI rising to 0.4% from 0.2%.
Stronger-than-expected inflation data has reinforced expectations that the Federal Reserve (Fed) will maintain interest rates at 4.25%-4.50% for an extended period. The CME FedWatch Tool now indicates that the probability of a Fed rate cut in June has dropped to nearly 30%. Fed Chair Jerome Powell reaffirmed the central bank’s cautious stance, emphasizing that while inflation has moderated, the Fed is not rushing to lower rates due to continued labor market strength and economic resilience.
Meanwhile, the Swiss Franc (CHF) benefits from its safe-haven appeal amid rising geopolitical tensions. Israeli Prime Minister Benjamin Netanyahu announced that Israel would resume intense military operations in Gaza if Hamas did not release hostages by Saturday.
In Switzerland, inflationary pressures eased, with Consumer Price Index (CPI) inflation falling to 0.4% year-over-year in January, which is in line with market expectations and down from 0.6% in December. This marks the lowest level since April 2021. On a monthly basis, CPI declined by 0.1%, maintaining the previous month’s pace.
Trade Idea:
Consider selling USD/CHF on a break below 0.9060, targeting 0.9000, with a stop-loss at 0.9100. Safe-haven demand for CHF and Fed’s hawkish stance could drive further downside.