Swiss Franc Strengthens As US Dollar Slips On Dovish Fed Signals

USD/CHF extends its losses for the second consecutive day, trading around 0.8320 during Asian hours on Wednesday. The currency pair depreciated as the US Dollar (USD) lost ground following dovish remarks from New York Federal Reserve President John Williams.

Speaking on Tuesday, Williams noted that while he maintains his view that one more rate hike may be appropriate this year, he does not foresee additional rate increases in 2027. In response, the CME FedWatch Tool suggests markets are currently pricing in roughly a 77% probability that the Fed will leave interest rates unchanged this month, alongside an 88% chance of a rate hike in December.

Market focus now shifts to the US September CPI inflation data scheduled for release later in the North American session, which could offer clearer direction on the Federal Reserve’s monetary policy path. Headline U.S. CPI is expected to show a year-over-year rise of 3.6% in September, up from 3.4% in August. Meanwhile, Core CPI—which excludes volatile items—is projected to tick up to 2.5% year-over-year from 2.4% in the previous month.

Yield on the Swiss 10-year government bond rose to near 0.56%, tracking a broader decline in global bond yields and falling oil prices. This drop in oil came after Russia agreed to release diesel supplies onto global markets, easing concerns over fuel shortages and reducing the immediate need for fiscal household support. Higher bond yields could provide support for the Swiss Franc (CHF).

Meanwhile, Swiss inflation rose to a two-year high of 1% in September, driven mainly by elevated energy prices amid the prolonged Middle East conflict, though it remained well within the Swiss National Bank’s 0–2% target range. The Swiss National Bank (SNB) kept its policy rate at 0% in September, with Vice Chairman Martin noting that no rate adjustment is currently needed due to low and stable inflation and limited spillover risks, adding that the Swiss economy was working "very well." While most economists expect the policy rate to remain unchanged through 2027, markets continue to price in a rate hike by year-end and roughly three hikes by the end of 2027.

USD/CHF seen consolidating as UOB tightens near-term range

Strategists at UOB Group note that their early-October call for USD/CHF to have “likely entered a range-trading phase between 0.8245 and 0.8365” remains broadly intact, even after the Dollar “rose to a high of 0.8350” yesterday. They point to “a tentative buildup in upward momentum,” but stress that it is “insufficient to indicate a sustained rise.” As a result, UOB continues to look for range-bound price action, but now “expect a narrower range of 0.8295/0.8365” over the coming 1–3 weeks. The bank adds that, looking ahead, “should USD close above 0.8365, it would increase the risk of a break above 0.8385.”