The USD/CHF pair advanced on Monday, trading around 0.8070 at the time of writing up 0.35% on the day after touching a three-week high earlier in the session.
The move comes as the Swiss franc (CHF) weakened following softer inflation data, while the US dollar (USD) extended gains on continued policy divergence.
Swiss inflation slips below expectations
Data from the Swiss Federal Statistical Office showed that the Consumer Price Index (CPI) declined 0.3% month-on-month in October, a sharper drop than the expected 0.1% and following a 0.2% fall in September. On an annual basis, inflation eased to 0.1%, down from 0.2% previously and below the forecast of 0.3%.
The latest figures confirm that price growth remains near the lower bound of the Swiss National Bank’s (SNB) target range of 0% to 2%, reigniting speculation that policymakers may consider reintroducing negative interest rates if disinflation persists.
According to the latest BHH MarketView report, money markets now price a 70% probability of a 25-basis-point rate cut to -0.25% within the next twelve months, up from 50% previously.
While SNB President Martin Schlegel continues to signal caution, Governing Board member Petra Tschudin recently noted that the central bank stands ready to act if economic conditions weaken further.
Dollar supported by rate divergence and cautious Fed outlook
The US dollar continues to find support from a widening policy gap between the SNB and the Federal Reserve (Fed).
Following last week’s rate cut, Fed Chair Jerome Powell emphasized that another move in December remains “far from a done deal,” suggesting a more data-dependent stance rather than a clear easing path. This relative policy advantage has kept the greenback broadly firm across major currency pairs.
Mixed US manufacturing signals
In the US, the Institute for Supply Management (ISM) Manufacturing PMI slipped to 48.7 in October from 49.1 in September, marking the eighth straight month of contraction and signaling ongoing weakness in factory activity. However, the Prices Paid component rose to 58, hinting at lingering inflationary pressures.
Meanwhile, the S&P Global Manufacturing PMI painted a brighter picture, rising to 52.5 from 52.0 and indicating moderate expansion in the sector.
Outlook
Despite mixed US data, the combination of subdued Swiss inflation and a resilient US dollar continues to support USD/CHF. With interest rate differentials firmly in favor of the greenback, the pair remains comfortably above the 0.8050 level, and further gains could be on the horizon if SNB rate cut expectations strengthen.
