USD/CHF settles below 3-week high, posts weekly gain

The USD/CHF currency pair settled below recent high of 0.8014, its strongest level since September 5th, in the wake of the Swiss National Bank’s policy decision and after US PCE inflation data met expectations and reinforced bets that the Federal Reserve could ease policy further this year.

Annual core PCE inflation has remained steady at 2.9% in August, while annual PCE inflation has accelerated to 2.7% from 2.6% in July.

Markets are now pricing in about an 85% chance of a 25 basis point Fed rate cut in October and a 33% chance of another 25 bps cut in December.

The Fed lowered its federal funds rate target range by 25 basis points to 4.00%-4.25% at its September meeting.

Federal Reserve Chair Jerome Powell said this week the US central bank had to continue balancing the competing risks of high inflation and a weakening job market in its future policy decisions.

Meanwhile, the Swiss National Bank left its policy rate without change at 0% at its September 25th meeting, in line with market consensus. This way, borrowing costs remained at their lowest level since August 2022.

Inflationary pressure has remained subdued, as inflation picked up to 0.2% in August from -0.1% in May, propelled mostly by tourism and imported goods.

The central bank now forecasts average inflation at 0.2% for 2025, at 0.5% for 2026 and at 0.7% for 2027.

On the global trade front, US President Donald Trump announced a new round of tariffs on imported drugs, trucks and furniture, which will take effect on October 1st.

The major Forex pair gained 0.30% for the week.