News Maker 23

USD/CHF strengthened during Wednesday's trading (August 26) as the US dollar received a boost from US inflation data showing persistent price pressures. The currency pair moved to the 0.8052–0.8055 range up approximately 0.4%–0.5% from the previous session after trading near 0.8017 earlier. The rise in USD/CHF reflects increased demand for the dollar alongside a weakening Swiss franc.

The dollar gained momentum after the US Personal Consumption Expenditures (PCE) price index rose 0.2% month-on-month in July, while annual inflation held at 3.7% slightly above the market expectation of 3.6%. Core PCE also remained steady at 3.3%. The data reinforced the view that US inflation remains too high for the Federal Reserve to adopt a more dovish stance anytime soon.

Market reaction was evident in rising expectations for a Fed rate hike. Interest rate futures showed the probability of a September hike rising to around 44% from 36% prior to the data release, while the market also began pricing in at least one rate hike before year-end. Expectations of higher US interest rates provide a relative advantage for the dollar over the franc, particularly as the Swiss National Bank faces significantly lower domestic inflation pressure and maintains a looser monetary policy.

Nevertheless, USD/CHF could still face high volatility leading up to the Jackson Hole Symposium. Markets are awaiting a speech by Fed Chair Kevin Warsh on Friday to see whether the central bank will maintain its focus on inflation or begin paying greater attention to the risk of an economic slowdown. A hawkish tone could strengthen the dollar and push USD/CHF higher, whereas more cautious comments might dampen rate-hike bets and allow the franc to recover.