Key Moments
- USD/CHF stalled a four-day advance and traded near 0.8140 in Asian hours on Friday as the U.S. Dollar came under pressure.
- U.S. July producer prices were softer than expected, with headline PPI flat on the month and core PPI up 0.2%.
- Swiss inflation eased to 0.4% in July, supporting expectations that the SNB can keep its policy rate at 0% and tolerate continued Franc softness.
Dollar-Franc Pair Retreats After Four-Day Rally
USD/CHF interrupted its four-session winning streak on Friday, trading around 0.8140 during Asian hours. The pair edged lower as the U.S. Dollar faced selling pressure following a weaker-than-anticipated U.S. inflation print.
Investors are now focused on U.S. July Retail Sales figures, which are due later in the day and are expected to provide further direction for the Dollar and broader risk sentiment.
Soft U.S. Producer Prices Shift Fed Policy Expectations
Fresh data from the Bureau of Labor Statistics showed that U.S. wholesale prices for goods and services were unchanged in July, undershooting expectations for a 0.2% increase and following a revised 0.1% decline in June. Stripping out food and energy, the core Producer Price Index rose 0.2%, slightly below the market consensus of 0.3%.
On a year-over-year basis, headline PPI advanced 4.7% in July, while core PPI increased 4.2% over the same period.
| U.S. PPI Data – July | Actual | Expected | Prior (June, revised) |
|---|---|---|---|
| Headline PPI (month-over-month) | 0.0% | 0.2% | -0.1% |
| Core PPI (month-over-month) | 0.2% | 0.3% | – |
| Headline PPI (year-over-year) | 4.7% | – | – |
| Core PPI (year-over-year) | 4.2% | – | – |
These weaker inflation readings have influenced expectations for the Federal Reserve’s next move. Data from the CME FedWatch Tool indicated that markets were assigning a 34.8% chance of a rate hike at the upcoming September meeting, down from 40% immediately after the PPI release.
Swiss Inflation Eases, Supporting SNB’s Cautious Stance
In Switzerland, inflation pressures have also moderated. Headline inflation slipped to 0.4% in July from 0.5%, marking the lowest level in four months. The data underscores the limited transmission of higher energy prices, which have been influenced by geopolitical tensions.
This softer outcome stands in contrast to the Swiss National Bank’s earlier projection of a modest pickup in inflation in the near term, a view communicated after it recently kept its policy rate unchanged at 0%.
The SNB is broadly expected to maintain borrowing costs at current levels for the remainder of the year. Additional easing is seen as a backup option rather than the central scenario, with Swiss banks having avoided significant stress. While most economists do not anticipate an initial SNB rate hike before early 2028, pricing in currency markets reflects expectations for a possible increase as early as March 2027.
Analysts See Scope for Further Franc Weakness
Strategists at OCBC observe that “near-term inflation risks remain limited,” even though the recent weakening of the Swiss Franc could at some point translate into higher import prices. They argue that any such influence “is unlikely to be felt for at least another two quarters,” and emphasize that domestic price dynamics “remain subdued and below the midpoint of the SNB’s 0-2% price stability range,” reinforcing the notion that the SNB can remain patient and allow for additional Franc softness.
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