Swiss Franc Strengthens as US Inflation Pressures Dollar

The US Dollar has weakened due to softer inflation metrics in the United States. According to the CME FedWatch Tool, markets are now pricing in a 34.8% probability of a U.S. rate hike at the upcoming September meeting, down from 40% immediately following the PPI data release.

The Swiss Franc has strengthened as a result, reaching its lowest level in four months with inflation dropping to 0.4% in July from 0.5%. This lower reading contrasts with the Swiss National Bank's (SNB) expectation of a modest near-term pickup in inflation.

Analysts at OCBC note that 'near-term inflation risks remain limited,' even as the recent depreciation of the Swiss Franc could eventually feed through via higher imported prices.