USD/CHF edged lower to around 0.7960 during Asian trading on Monday, extending its pullback as the US Dollar (USD) weakened amid mounting concerns over a potential US government shutdown.
US political standoff pressures the Dollar
President Donald Trump is scheduled to meet congressional leaders on Monday to negotiate a funding deal. Without an agreement, parts of the government would shut down on October 1, coinciding with the implementation of new tariffs on trucks, pharmaceuticals, and other goods. According to Reuters, the standoff could also delay the release of September’s nonfarm payrolls and other key economic reports.
Shutdown risks have amplified broader caution in financial markets, adding to USD pressure already building from expectations of further Federal Reserve (Fed) rate cuts.
Fed rate cut bets rise after PCE data
The latest US inflation figures reinforced the dovish outlook. The Personal Consumption Expenditures (PCE) Price Index rose 2.7% year-on-year in August, in line with forecasts and slightly higher than July’s 2.6%. Core PCE, excluding food and energy, held steady at 2.9%.
Markets now price in an 88% probability of a Fed rate cut in October and a 65% chance of another in December, according to the CME FedWatch Tool. Lower rate expectations continue to erode the dollar’s yield advantage, keeping USD/CHF under pressure.
SNB outlook: rates steady after aggressive easing
On the Swiss side, the Swiss National Bank (SNB) left its policy rate unchanged at 0% last week, pausing after six consecutive cuts since March 2024. Economists expect rates to remain on hold through next year, given subdued domestic inflation and risks stemming from slowing global trade and growth.
With US political uncertainty in focus and diverging central bank outlooks, USD/CHF could face further volatility in the coming sessions.
