USD/CHF scales 1-week peak ahead of US CPI data, SNB meeting

The USD/CHF currency pair extended the gain from the prior trading day on Wednesday ahead of the essential US CPI inflation data that could provide further clues over the Federal Reserve’s monetary easing path and ahead of the outcome of the Swiss National Bank’s policy meeting.

Annual headline consumer inflation in the US probably picked up to 2.7% in November, according to market consensus, from 2.6% in October.

Annual core CPI inflation probably steadied at 3.3% in November.

In monthly terms, both headline and core consumer prices probably rose 0.3% in November.

“Should this scenario materialise, there could be concerns that the Federal Reserve may not be able to cut rates as quickly as hoped, potentially benefiting the U.S. dollar,” James Kniveton, senior corporate FX dealer at Convera, was quoted as saying by Reuters.

Data from last Friday showed that US employment growth had picked up in November, but a surge in the unemployment rate to 4.2% suggested a cooling labor market, which reinforced the case for the Fed to deliver a rate cut again this month.

Markets are now pricing in about an 85% chance of a 25 basis point rate cut at the Federal Reserve’s December meeting.

Meanwhile, the Swiss National Bank is largely expected to cut its key policy rate by 25 basis points to 0.75% at its December meeting, which would be the fourth consecutive reduction in borrowing costs.

In September, SNB policy makers noted that further rate cuts could become necessary in the upcoming quarters to ensure price stability in the medium term.

Inflationary pressure in Switzerland has eased significantly, with annual consumer price inflation standing at 0.7% in November.

Currency Pair Performance

The USD/CHF currency pair was last gaining 0.40% to trade at 0.8850. The major Forex pair earlier advanced to 0.8853, or a level unseen since December 4th.