Swiss Franc Softens as Focus Shifts to Fed, SNB Data

Key Moments

Franc Weakens as Markets Await Swiss Reserve Figures

USD/CHF climbed as the Swiss Franc retreated ahead of the release of Switzerland’s Foreign Currency Reserves for September, scheduled for Wednesday. The pair extended its upward move for a third consecutive day, with trading centered around 0.8330 during Asian hours.

Recent Swiss labor data showed no change in the seasonally-adjusted Unemployment Rate, which remained at 3.1% in September, marking the fifth straight month at that level. Market participants were set to scrutinize the incoming Foreign Currency Reserves figures later in the day for additional signals on the Swiss National Bank’s stance and potential implications for CHF.

Haven Demand for CHF Offset by French Debt Concerns

DBS strategists observed that a spell of “softer US inflation and payrolls coincided with France’s sovereign debt concerns,” which supported safe-haven demand for the Swiss Franc. They pointed out that “EUR/CHF declined for a third consecutive week as widening French OAT-Bund spreads outweighed the Swiss National Bank’s decision to buck the global tightening cycle and to temper its CHF intervention rhetoric,” indicating that political and fiscal worries in France have been exerting a stronger influence on the currency than the SNB’s policy shift.

Oil-Led Dollar Strength Faces Constraint from Softer U.S. Data

The USD/CHF pair appreciated as the US Dollar drew backing from a rebound in crude oil prices, with ongoing Middle East supply risks keeping inflation fears and rate-hike expectations under the spotlight.

At the same time, the upside for the Greenback could face headwinds after weaker US labor market figures last week dampened the outlook for additional Federal Reserve tightening. Data from the CME FedWatch tool showed that interest-rate swaps were pricing in roughly a 20% chance of a rate increase at the Fed’s upcoming October meeting.

Fed’s Schmid Highlights Structural Inflation Risks

Fed official Schmid’s recent remarks added a slightly more hawkish tone to the policy debate. His speech registered an 8/10 reading on the FXS Speechtracker, above the historical average of 7.5/10, signaling a firmer stance than usual. The focus on a labor market that “remains in a good place,” frustration with ongoing inflation, and the assessment that AI has become one of the largest contributors to inflation underscored concerns about structural price pressures and the importance of maintaining Fed credibility.

His observation that the central bank still has work to do on short-term rates, even as long-term yields have moved higher, reinforced expectations for policy rates to remain elevated for an extended period. Such a backdrop is typically viewed as supportive for the US Dollar relative to lower-yielding currencies.

The FXS Fed Sentiment Index rose by 0.34 points to 137.91, keeping the measure solidly in hawkish territory above the neutral level of 100. This incremental increase, in line with the firmer FXS Speechtracker score, pointed to a modest but clear strengthening of hawkish Fed expectations, which is likely to remain a supportive factor for the Dollar against currencies like the Swiss Franc.

Market Snapshot: Key CHF-Related Metrics