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Source: Newsmaker.id
The Swiss franc weakened against the US dollar in Monday's trading (Sept 7), with the USD/CHF pair rising for the second consecutive day to hover around 0.8110 during the Asian session. The pair's appreciation came as the US dollar regained support from growing expectations that the Federal Reserve might raise interest rates at its September meeting, following US labor data that significantly outperformed forecasts.
US Non-Farm Payrolls rose by 162,000 jobs in August—far exceeding the estimated 56,000—while the unemployment rate held steady at 4.1%. Annual wage growth slowed only moderately to 3.1%. The data prompted the market to price in tighter monetary policy, with the probability of a 25-basis-point Fed rate hike in September standing at around 58%.
The dollar also drew support from a surge in oil prices following a renewed escalation of tensions between the US and Iran over the weekend. Rising energy costs sparked concerns that inflationary pressures could intensify, further bolstering the case for the Fed to maintain a hawkish stance. However, the dollar's gains remained limited overall, as markets also weighed the potential for policy tightening by other major central banks alongside policy uncertainty within the US.
On the other hand, Swiss fundamentals have begun to provide support for the franc. Swiss annual inflation rose to 0.8% in August from 0.4% in July—surpassing the 0.5% forecast and reaching its highest level since September 2024. Core inflation also climbed to 0.4%. These stronger economic figures fueled speculation that the Swiss National Bank (SNB) could raise interest rates sooner if price pressures continue to mount.
Nevertheless, the market does not yet view an imminent SNB rate hike as the base-case scenario. A Swiss Bankers Association survey indicates that respondents still anticipate the SNB will maintain its policy rate at 0% through the end of the year, whereas the market does not expect the first hike until around June 2027. This divergence in expectations means the short-term trajectory of USD/CHF remains heavily dependent on shifts in the outlook for US interest rates.
Market Impact:
In the short term, the Swiss franc could face pressure if this week's US inflation data reinforces the likelihood of a Federal Reserve rate hike. US CPI will serve as the next key catalyst; a hotter-than-expected figure could drive Treasury yields and the dollar higher, pushing USD/CHF up further. Conversely, softer US inflation could dampen rate-hike expectations and allow the Swiss franc to strengthen again—particularly if the market increasingly prices in the possibility of the SNB also tightening its monetary policy. (CP)