USD Struggles to Capitalize on Stronger CPI Report
The US Dollar (USD) has struggled to capitalize on the latest Consumer Price Index (CPI) report, which showed headline inflation rose 0.4% in August, matching market expectations.
This led to increased expectations that the Federal Reserve could raise interest rates next week, with the CME FedWatch Tool pricing in an 85% chance of a rate hike at the September 15-16 meeting.
However, the US Dollar Index (DXY) has only briefly climbed to 99.36 before pulling back, and now trades around 99.
The Swiss Franc (CHF), on the other hand, underperforms its major peers, with USD/CHF holding onto gains despite SNB Chairman Martin Schlegel's statement that 'the Swiss Franc exchange rate is a challenge for the Swiss economy', indicating potential intervention if the currency appreciates sharply.
Switzerland's low interest rates and subdued inflation backdrop support the SNB's zero-interest-rate policy, making it unlikely to raise rates anytime soon, unlike other major central banks.