USD/CHF rose by 0.4% to 0.8080, extending its climb above 0.80 for a third consecutive session. The greenback has remained supported since the October 29 FOMC meeting, after Fed Chair Jerome Powell cautioned that a December rate cut was not a foregone conclusion. Next, the Swiss National Bank’s remark on October 31 that it would consider negative rates if necessary gained credence after yesterday’s softer inflation data. Even so, the OIS market is pricing only a 5% probability of an SNB cut at its December 11 meeting. When it left rates unchanged at 0% in September, the SNB noted that US tariffs affected only part of the Swiss economy and maintained expectations for a gradual improvement in growth and inflation over the coming quarters.
Since late June, USD/CHF has repeatedly reverted within its 0.79-0.81 range, underscoring the market’s respect for these technical boundaries, aligning with Switzerland’s preference for EUR/CHF to maintain a post-Liberation Day range of 0.92 and 0.9450. In contrast, the European Central Bank appears more at ease than either the SNB or the Fed in keeping policy unchanged. We remain cautious about markets pricing in a USD recovery that may prove inconsistent with US data once releases resume after the US government shutdown ends. The latest weaker-than-expected US ISM manufacturing PMI was a case in point. The overall index fell to 48.7 in October, bucking the consensus for an improvement to 49.5 from 49.1 in the previous month. Prices paid fell for a fourth month to 58, below 60 for the first time since January, continuing to allay worries about tariff-led inflation. Employment climbed for a fourth month to a five-month high of 46 but remained below the breakeven 50 level.
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