USD/CHF Slides to 0.85 as Swiss Inflation Surprises to the Downside
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
The U.S. dollar fell sharply against the Swiss franc on Saturday, with the USD/CHF pair dropping to 0.8502, its lowest level since April 2022, after new data showed Swiss inflation cooled more than expected. The Swiss Federal Statistical Office reported that headline inflation for June came in at 1.1% year-over-year, well below the consensus forecast of 1.6%, triggering a rush into the safe-haven franc.
Markets interpreted the softer inflation print as a sign that the Swiss National Bank (SNB) may delay further rate hikes or even begin discussing a potential rate cut later this year. However, the franc still gained strength due to increased demand for lower-risk assets amid global economic uncertainty, pushing the currency to fresh multi-year highs.
The surprise data fueled volatility across FX markets. The SNB has kept its policy rate at 1.75% since March, after a series of hikes intended to cool energy-driven inflation. Analysts believe that today’s data could give the central bank more flexibility heading into the fall, especially if the eurozone continues to show signs of economic stagnation and the Federal Reserve leans toward rate cuts in September.
Meanwhile, the U.S. dollar was broadly weaker, as recent labor and inflation data in the U.S. continued to show signs of deceleration. Traders are now pricing in a 73% chance of a Fed rate cut by the September FOMC meeting, according to CME FedWatch. This growing divergence in central bank trajectories has fueled sharp moves in dollar pairs across the board.
The USD/CHF move was further amplified by a drop in U.S. Treasury yields, with the 10-year note falling below 3.95%. Demand for the Swiss franc tends to rise during periods of yield compression, given Switzerland’s strong current account surplus and low public debt.
Currency strategists at UBS said the franc could continue gaining ground if U.S. economic softness persists and global risk sentiment deteriorates. However, they warned that if Swiss inflation continues to decline rapidly, it may force the SNB to act preemptively — potentially limiting the upside for CHF.
Equity markets in Switzerland were mixed following the inflation print, with the SMI index closing marginally lower. Bond yields dropped across the curve, reflecting expectations that the SNB might turn more dovish by Q4.
For now, the technical outlook for USD/CHF remains bearish. A clean break below 0.8500 could open the door to further downside toward the 0.84–0.8350 zone unless U.S. data surprises to the upside in the coming week.
