Swiss Franc Surges on Weakening US Inflation

The Swiss Franc has strengthened as softer US inflation pressures the US Dollar.

The cooling inflation metrics have shifted expectations regarding Federal Reserve policy, with markets 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.

In Switzerland, inflation dropped to 0.4% in July from 0.5%, its lowest level in four months, highlighting the limited pass-through from higher energy prices linked to geopolitical tensions.

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.