Swiss Franc Advances as Rate-Cut Hopes Ease

Key Moments

USD/CHF trades around 0.7680 on Thursday, down 0.48% after two sessions of gains.
Swiss 10-year government bond yield rises to 0.32%, its highest level since December.
Stronger U.S. Nonfarm Payrolls data reduces expectations for near-term Federal Reserve rate cuts.

USD/CHF Retreats as Safe-Haven Demand Supports Franc

USD/CHF is trading lower around 0.7680 on Thursday at the time of writing, declining 0.48% on the day and reversing a two-day winning streak. The pair is facing headwinds as the Swiss Franc (CHF) continues to draw support from persistent safe-haven flows alongside rising domestic yields.

Rising Swiss Yields Enhance Currency Appeal

Switzerland’s 10-year government bond yield has climbed to 0.32%, its highest reading since December. The move is increasing the relative attractiveness of Swiss Franc-denominated assets to global investors. Higher yields are encouraging capital inflows into Switzerland and underpinning the CHF, thereby limiting upside potential for USD/CHF.

The Swiss National Bank (SNB) is expected to maintain its policy rate at 0% in the coming months, with inflation still close to target and a high threshold for reintroducing negative interest rates. Market attention is now turning to Friday’s release of Switzerland’s January Consumer Price Index (CPI), which is anticipated to show annual inflation unchanged at 0.1%.

Inflation Risks and SNB Policy Outlook

Analysts at Commerzbank see the balance of risks to headline inflation tilted higher, reflecting the recent advance in Oil prices that could quickly affect transport-related costs. According to the bank, a stronger-than-expected inflation reading would offer some relief to the Swiss National Bank by tempering pressure for additional easing.

“We see a risk of an upside surprise for the headline rate: the Oil price rose by roughly 10 USD in January, and rising oil prices usually have a quick effect on Swiss transport prices – a component which is currently making a significant negative contribution to the headline rate”, noted the bank.

U.S. Labor Data Lifts Dollar but Tempers Fed Cut Hopes

On the U.S. side, the U.S. Dollar (USD) remains underpinned after the release of robust labor market figures. The Nonfarm Payrolls (NFP) report showed an increase of 130,000 jobs in January, surpassing market projections of 70,000. The Unemployment Rate edged down to 4.3% from 4.4%.

Following the data, investors scaled back expectations for imminent Federal Reserve rate cuts. The CME FedWatch tool shows that around 94% of market participants now anticipate the Fed will keep rates unchanged at its next meeting, up from 80% prior to the jobs report. Probabilities for easing in March and April have fallen notably, although markets still consider June as a possible timing for a first rate reduction.

Swiss Franc Performance Across Major Currencies

The following table displays the percentage change of the Swiss Franc (CHF) against selected major currencies today. According to the data, the Swiss Franc was strongest versus the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD	—	-0.04%	-0.12%	0.17%	-0.02%	0.00%	-0.32%	-0.31%
EUR	0.04%	—	-0.09%	0.26%	0.01%	0.04%	-0.28%	-0.27%
GBP	0.12%	0.09%	—	0.34%	0.10%	0.13%	-0.19%	-0.19%
JPY	-0.17%	-0.26%	-0.34%	—	-0.27%	-0.23%	-0.59%	-0.55%
CAD	0.02%	-0.01%	-0.10%	0.27%	—	0.04%	-0.30%	-0.29%
AUD	-0.01%	-0.04%	-0.13%	0.23%	-0.04%	—	-0.33%	-0.32%
NZD	0.32%	0.28%	0.19%	0.59%	0.30%	0.33%	—	0.00%
CHF	0.31%	0.27%	0.19%	0.55%	0.29%	0.32%	-0.01%	—

The heat map represents percentage moves of major currencies against one another. The base currency is taken from the left-hand column and the quote currency from the top row. For instance, selecting the Swiss Franc in the left column and moving horizontally to the U.S. Dollar column shows the percentage change for CHF (base)/USD (quote).