- The USD/CHF pair is expected to decline as the mixed U.S. CPI data boosts expectations for a Federal Reserve rate cut in September.
- In July, the U.S. CPI was reported at 2.7% year-on-year, slightly lower than the 2.8% anticipated, while the Core CPI rose by 0.3% month-on-month and 3.1% year-on-year.
- President Trump is likely to increase pressure on the Federal Reserve, hinting at a potential lawsuit against Chairman Jerome Powell due to what he calls “severe incompetence” in managing the Federal Reserve.
The Swiss franc (CHF) gained strength against the U.S. dollar (USD) on Tuesday, pushing the USD/CHF lower. This shift comes as inflation data from the U.S. heightens expectations for a Federal Reserve rate cut this September. Sentiments regarding the Greenback have taken a hit, especially following President Trump’s intensified remarks and threats of legal action against the Fed’s Chairman, Jerome Powell.
Currently, the USD/CHF trades close to 0.8080, marking a decrease of around 0.50% for the day. Meanwhile, the U.S. Dollar Index (DXY) remains around 98.10, where it has hovered for nearly two weeks.
U.S. CPI Indicates Easing Inflation
The U.S. Bureau of Labor Statistics reported a 0.2% month-over-month increase in the headline consumer price index (CPI) for July, which aligns with market expectations. On a yearly basis, inflation remains steady at 2.7%, just under the 2.8% prediction. Core CPI, excluding volatile food and energy, saw a year-on-year rise of 3.1%, slightly surpassing expectations. While these core numbers may lessen the dovish outlook somewhat, the markets are, for the most part, more focused on the softer headline data and broad trends.
Post-release, the CME FedWatch tool indicated a 94% likelihood of a 25 basis point rate cut in September, up from 84% before the data was published.
Federal Reserve Governor Schmidt commented on Tuesday, advocating for a “patient approach” regarding changes to the Fed’s policy rate. He emphasized that maintaining a “conservative and restrictive” approach is suitable for now. He noted that tariffs seem to have a minimal impact on inflation, expressing his view that it’s more prudent to hold interest rates steady rather than cut them. He mentioned that while growth remains robust, inflation is still relatively high, indicating the policy is “conservatively restrictive,” but not overly so. Schmidt did suggest he might revise his stance if any signs of weakened demand arise.
Trump’s Pressure on Powell
In a post on Truth Social, Trump stated:
“I am considering allowing a massive lawsuit against Powell to proceed for the horrific, grossly incompetent work that he undertakes in managing the construction of the Fed building.
The franc also found some support from clarity around gold tariffs after Trump confirmed that U.S. tariffs on gold imports from Switzerland would not move forward. Previously, there had been concerns about a potential 39% levy on gold bars. This change provided immediate relief to Switzerland’s bullion sector, though the industry is still waiting for formal confirmation to regain complete certainty.
