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Swiss Franc Steadies Amid Fed Hike Expectations and Safe-Haven Flows
Confirmed
In Short: The Swiss Franc has steadied as Federal Reserve rate hike expectations and safe-haven flows balance against the Swiss National Bank's policy stance.
The CME FedWatch tool indicates a 60.6% probability of another quarter-point hike, while the SNB is expected to keep its policy rate at 0% for the foreseeable future.
Analysts note that rising tensions in the Middle East could boost the Franc, but traders will closely watch upcoming US inflation data for further cues on the Fed's next move.
The dollar-Swiss franc pair saw modest gains, with the greenback supported by a strong US non-farm payrolls report, pushing the pair above the 50-day SMA.
What's confirmed
What's still developing
- The CME FedWatch tool showed probability hovering around 60.6% for another quarter-point Federal Reserve (Fed) rate hike, whereas the Swiss National Bank (SNB) is widely projected to leave its policy rate anchored at 0% well into next year.
- If the reports show hotter-than-expected outcomes, this could lift the US Dollar (USD) against the Swiss Franc (CHF).
- Analysts at Brown Brothers Harriman note that, despite the recent upside surprise in Swiss inflation, the policy outlook remains remarkably benign.
- They highlight that “the swaps curve continues to fully price in a first 25bps hike to 0.25% in June 2027,” underscoring market confidence that the SNB can stay on hold for an extended period.
- In their view, “the SNB has plenty of room to keep rates at 0.00% for some time, given that inflation remains well within the bank’s price stability mandate of less than 2% per annum,” a backdrop that helps cap how far the Franc can benefit from the latest data surprise.
- The stronger-than-expected NFP jobs report revived expectations that the Federal Reserve may consider a rate hike at its upcoming September meeting.
- Safe-haven assets like gold initially dipped below $4,400 before trying to recover.