Swiss Franc weakens as US Dollar gains ahead of PCE inflation data

USD/CHF gains ground after posting minor losses, trading around 0.8040 during the Asian hours on Wednesday. The pair appreciates as the US Dollar (USD) gains support ahead of the upcoming US Personal Consumption Expenditures (PCE) release, the Federal Reserve’s key inflation metric.

Market participants are closely watching Fed Chair Kevin Warsh’s speech at the annual Jackson Hole symposium on Friday for clearer signals regarding a potential interest rate adjustment in September.

Dollar steadies as US sanctions guidance remains vague

Analysts at Commerzbank note that the Dollar found some support after the US Treasury Secretary’s press conference on Monday, even though the policy signal was far from clear. They highlight that the briefing “provided few details on which countries would be affected by potential secondary sanctions – or to what extent,” and, “perhaps even more important,” that “no timeline for their implementation was mentioned.” In Commerzbank’s view, this lack of specificity helped calm immediate market nerves, such that “the US dollar stabilized again during yesterday’s trading,” even as broader questions over the policy path and its implications for the Dollar’s medium-term outlook remain unresolved.

Further gains for the Greenback may be limited as safe-haven demand softens. Market tension eased after reports surfaced that Iran and Oman discussed establishing a temporary joint maritime corridor in the Strait of Hormuz. With technical talks ongoing to finalize a permanent framework, the proposed corridor aims to improve strait administration, traffic management, maritime security, and real-time information sharing across the region.

Swiss inflation dipped to 0.4% in July, keeping the Swiss National Bank on track to hold interest rates at 0% through 2027. While additional rate cuts remain a backup option, economists forecast the first hike in early 2028, though financial markets anticipate one as early as March 2027.

Treasury support seen underpinning carry trade demand

Analysts at ING argued that the US authorities’ increased focus on stabilising the Treasury market should be interpreted as a supportive development for risk assets. In their view, “greater interest in protecting the Treasury market is more a risk-positive story,” implying that volatility is likely to remain subdued and that “interest will remain firm in the carry trade” as investors continue to seek yield in a low-volatility environment.