Key Moments
- USD/CHF trades around 0.8090 in Asian hours after recovering from more than 0.5% losses in the prior session.
- July US Nonfarm Payrolls unexpectedly fell by 23,000, with June jobs sharply revised down to 20,000 from 57,000, pressuring Fed hike expectations.
- Swiss inflation eased to 0.4% YoY in July, reinforcing expectations that the SNB will keep rates at 0% and tolerate a softer Franc.
Safe-Haven Dollar Strengthens as Strait of Hormuz Risks Persist
USD/CHF is edging higher in Asian trading on Monday, hovering near 0.8090 after losing more than 0.5% in the previous session. The pair is supported by renewed demand for the US Dollar as a safe-haven asset, with investors reacting to elevated geopolitical risks tied to the United States-Iran conflict and heightened tensions around the Strait of Hormuz.
The conflict has entered a critical diplomatic juncture, with what are described as intense military engagements and strategic maneuvers around the key shipping corridor prompting market caution. Iran has indicated that discussions with Oman aimed at creating a secure maritime passage through the Strait are close to producing an agreement. However, Tehran stressed that any such arrangement would not translate into an immediate reopening of the route.
In parallel, Iran-backed Houthi forces in Yemen have claimed responsibility for a recent strike on Saudi Arabia’s Jazan refinery, while a vessel operated by Abu Dhabi National Oil Co. was attacked in the Strait. Tehran has ruled out direct talks with the United States for the time being, accusing Washington of violating the interim peace accord reached in June. Despite mounting calls on the US administration to reach a resolution with Tehran, President Donald Trump has signaled a patient approach to the negotiations.
US Labor Data Cools, Dimming September Fed Hike Odds
The latest US labor market figures have added a dovish tilt to Federal Reserve expectations. Nonfarm Payrolls unexpectedly declined by 23,000 in July, while June job gains were revised sharply lower to 20,000 from an initially reported 57,000. The combination of a negative July print and sizable revisions has reinforced concerns that labor market momentum is weakening.
According to the CME FedWatch Tool, market participants now assign roughly a 46% probability to a 25-basis-point rate hike in September, down from 67% only a week earlier. With policy expectations softening, investors are turning their attention to upcoming inflation releases for additional guidance on the Fed’s next steps.
| Indicator | Latest Reading | Previous / Prior | Market Implication |
|---|---|---|---|
| US Nonfarm Payrolls – July | -23,000 | N/A | Signals cooling labor market |
| US Nonfarm Payrolls – June (revised) | 20,000 | 57,000 (initial) | Reinforces weaker jobs trend |
| Implied probability of 25 bps Fed hike in September (CME FedWatch) | ~46% | 67% a week earlier | Lower odds of near-term hike |
| Swiss CPI – July (YoY) | 0.4% | 0.5% | Supports SNB on-hold stance |
| SNB policy rate | 0% | 0% | Further cuts seen as contingency |
Subdued Swiss Inflation Underpins SNB’s Steady-Rate Stance
Swiss price pressures eased in July, with annual consumer inflation slowing to 0.4% year-over-year from 0.5% previously, marking a four-month low. The data indicate limited transmission of higher geopolitical-driven energy costs into domestic prices. The outcome ran counter to the Swiss National Bank’s expectation of a modest inflation uptick following its decision to keep the policy rate unchanged at 0%.
Against this backdrop, markets anticipate that the SNB will keep interest rates steady through the end of the year. Additional easing is viewed more as a contingency option than the central scenario, a stance that is aided by what is described as a resilient banking system.
SNB Seen Comfortable with Weaker Franc as Carry Demand Builds
The Swiss Franc continues to trade on the defensive as investors take advantage of low Swiss rates for funding carry trades and as policymakers appear willing to accept a softer currency. Analysts at OCBC highlight that the Swiss Franc “remains under pressure as carry trade funding demand grows and the SNB appears comfortable with a weaker currency.” They emphasize that with “inflation subdued and policy rates likely anchored at zero,” the environment points to ongoing softness in CHF, adding that “CHF weakness could persist into year-end.”
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