Swiss Franc Firm as Markets Await US, Inflation Signals

Key Moments

USD/CHF trades near 0.8180 in Asian hours on Tuesday after surrendering earlier gains as the Swiss Franc firmed ahead of CPI data.
Swiss annual CPI is projected to rise to 1.3% in October, while Real Retail Sales growth eased to 1.6% in September and manufacturing PMI climbed to 56.7.
U.S. Dollar sentiment is pressured by uncertainty around midterm election outcomes and upcoming Nonfarm Payrolls, with markets pricing roughly a 73% chance of a December Fed rate hike.

Franc Supported as USD/CHF Stalls

USD/CHF is trading around 0.8180 during Asian hours on Tuesday, holding flat after giving back its prior daily advance. The currency pair is encountering resistance as the Swiss Franc (CHF) finds buyers ahead of upcoming domestic Consumer Price Index (CPI) figures.

Market expectations point to Swiss monthly inflation holding at 0% in October. On an annual basis, CPI is anticipated to accelerate to 1.3% from the previous reading of 1.0%, providing an additional underpinning for the Franc.

Swiss Data Show Mixed but Resilient Backdrop

Fresh economic releases from Switzerland present a nuanced picture of domestic conditions. On Monday, data showed that Swiss Real Retail Sales increased by 1.6% year-on-year in September. While still positive, this marked a slowdown from an upwardly revised 3.9% rise in August and fell short of expectations for a 3% gain. It was also the weakest annual increase since March.

At the same time, manufacturing activity remained robust. The SVME Manufacturing Purchasing Managers Index (PMI) rose to 56.7 in October from 55.3 in September, beating market forecasts of 55.3. This reading marked the eighth straight month that the PMI signaled expansion.

Swiss Indicator	Period	Latest Reading	Previous / Revised	Market Expectation
Real Retail Sales (YoY)	September	1.6%	3.9% (August, revised)	3%
SVME Manufacturing PMI	October	56.7	55.3 (September)	55.3
Monthly CPI	October (expected)	0%	0%	–
Annual CPI	October (expected)	1.3%	1.0%	–

U.S. Dollar Pressured by Politics and Data Calendar

The U.S. Dollar (USD) has struggled for traction, leading USD/CHF to forfeit its earlier gains. The move comes as investors reassess Dollar exposure ahead of the U.S. midterm elections. Political scrutiny surrounding U.S. President Donald Trump and the Republican Party has increased, with higher energy prices being linked to ongoing tensions with Iran.

Prediction markets currently assign a 74% probability that the Democratic Party will secure control of the U.S. Senate, underscoring the elevated political risk premium around the vote and contributing to Dollar vulnerability.

Focus Turns to U.S. Labor Data and Fed Path

Alongside the political backdrop, market attention is also trained on the upcoming U.S. jobs report due later this week. The Nonfarm Payrolls release is expected to deliver fresh insight into the health of the labor market and help refine expectations for future Federal Reserve policy.

The Fed has maintained a hawkish tone. According to the CME FedWatch Tool, market pricing currently reflects roughly a 73% probability of another interest rate increase in December, following a policy pause in October. The employment figures will be closely watched for confirmation of that trajectory.

Analyst View: Election Outcome and Dollar Trajectory

Commenting on the potential impact of the U.S. midterms on the currency market, Commerzbank’s Norman Liebke stresses that the political outcome remains an important near-term driver for the Dollar, even if it is only one factor among several.

He argues that “the election result is unlikely to be entirely irrelevant for the dollar,” warning that if the Republicans were to lose their majorities in both chambers, “the dollar could come under greater pressure, as the Trump administration would have less political backing overall.” Liebke adds that a more limited shift in Washington would also carry consequences: “If only the House of Representatives changes hands, the dollar would likely face some headwinds as well, albeit to a lesser extent.”

Background: Understanding the Swiss Franc

Key Drivers of CHF

The Swiss Franc (CHF) is Switzerland’s official currency and is among the ten most actively traded currencies globally, with trading volumes far exceeding the size of the domestic economy. Its performance is influenced by overall market risk sentiment, Switzerland’s economic fundamentals, and policy actions by the Swiss National Bank (SNB), among other factors.

Between 2011 and 2015, the Franc was pegged to the Euro (EUR). The abrupt removal of this peg triggered a more than 20% surge in the currency, causing significant market disruption. Although the peg is no longer in place, the Franc’s performance remains closely linked to the Euro due to Switzerland’s substantial economic ties to the neighboring Eurozone.