SNB Dovishness Crushed by Fed Hawkishness

The Swiss Franc (CHF) has fallen to fresh four-month lows against the US Dollar (USD), following the Swiss National Bank's (SNB) decision to leave interest rates unchanged at 0%.

This move comes as no surprise, given that most analysts expected this outcome. The SNB also highlighted that inflation accelerated in August due to higher oil prices and is forecasted to continue rising over the coming months before declining in 2027.

However, the real story here lies in the contrast between the SNB's dovish stance and the Federal Reserve's (Fed) hawkish one. The US economy's strong growth, as indicated by the September Purchasing Managers' Index (PMI), has boosted expectations of a rate hike before the year-end.

In fact, futures markets are now pricing in nearly 70% chance of a 25% rate hike in October and nearly fully price in at least one more rate hike before the year-end. This is expected to fuel a steady US Dollar uptrend in the coming months.