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- USD/CHF recovers its daily losses as the US Dollar gains on easing trade tensions between the US and China.
- Softer US inflation data support a higher likelihood of Federal Reserve rate cuts.
- The Swiss Franc may gain ground as the SNB’s Meeting Minutes dismissed the possibility of further policy easing.
USD/CHF depreciates after opening with a gap up, trading around 0.7960 during the Asian hours on Monday. The pair recovers its daily losses as the US Dollar (USD) gains ground on rising hopes that Presidents Donald Trump and Xi Jinping may finalize a trade deal on Thursday in South Korea.
US Treasury Secretary Scott Bessent said that President Trump’s threat to impose 100% tariffs on Chinese goods “is effectively off the table.” Bessent added that China has agreed to make “substantial” soybean purchases and to postpone its rare-earth export controls “for a year while they re-examine it,” per CBS News.
However, the upside of the US Dollar could be limited as softer US inflation data helps in keeping the likelihood of the Federal Reserve (Fed) rate cuts higher. The CME FedWatch Tool indicates that markets are now pricing in nearly a 97% chance of a Fed rate cut in October and a 96% possibility of another reduction in December.
The US Bureau of Labor Statistics (BLS) reported on Friday that the US Consumer Price Index (CPI) rose 3.0% year-over-year (YoY) in September, following a 2.9% increase in the prior month. This reading came in below the market expectation of 3.1%. Meanwhile, the monthly CPI increased 0.3%, against the 0.4% rise seen in August.
The Swiss Franc (CHF) could receive support from reduced expectations of further policy easing by the Swiss National Bank (SNB). Minutes from the SNB’s September policy meeting showed that the Swiss central bank downplayed deflation risks and dismissed the possibility of returning to negative rates. The SNB noted that its monetary policy remains expansionary, with the full impact of previous easing measures still unfolding.
