Swiss Franc edges lower vs. Dollar on evidence of continued US inflation pressures

• The Swiss Franc weakens marginally against the US Dollar on Thursday after the release of US inflation data. 
• The data shows headline inflation coming out at 3.4%, beating estimates and previous results.
• Core inflation, however, shows less upside pressure and moderates down YoY. 

The Swiss Franc (CHF) falls marginally against the US Dollar (USD) on Thursday after the release of mostly higher-than-expected US inflation data. The data suggests the Federal Reserve (Fed) may delay cutting interest rates in order to keep up its war against inflation. Since higher interest rates attract more foreign capital inflows, the news is bullish for the US Dollar. 

Daily digest market movers: Swiss Franc adjusts lower after USD gets inflation-data pump

• The Swiss Franc edges down against the US Dollar after US inflation data for the month of December shows continued price pressures.  
• The Consumer Price Index (CPI) for December showed a 3.4% rise YoY in December, which was above the 3.2% forecast and the 3.1% registered in November. 
• CPI on a monthly basis, came out at 0.3% compared to analysts’ estimates of 0.2%. 
• Annual Core CPI came out slightly lower at 3.9%, compared to the 4.0% of November, but this was still more than the 3.8% expected. 
• With a rise of 0.3%, Core CPI on a monthly basis came out in line with expectations and the same as the 0.3% in November.  
• The release of the CPI data led to a slight fall in the market-gauged probabilities of the Federal Reserve cutting interest rates at its meeting in March 2024, from the upper 60s% to the lower 60s%. 
• That the odds still favor a Fed rate cut in March, however, still stands in contrast to the Swiss National Bank (SNB), which remains silent on the subject of bringing down interest rates.
• At the SNB’s last monetary policy meeting in December, the SNB Chairperson Thomas Jordan, avoided committing to cutting rate cuts, giving vague reasons relating to geopolitical risks. 

Swiss Franc technical analysis: USD/CHF in long-term downtrend 

USD/CHF – the number of Swiss Francs (CHF) that one US Dollar (USD) can buy – rises on Thursday, extending the pair’s short-term recovery rally. 

The USD/CHF pair is in a long-term downtrend, however, suggesting the pair is at risk of recapitulating and continuing lower.  

US Dollar vs Swiss Franc: 4-hour Chart 

The four-hour chart shows the pair pulling back after bottoming at the late November lows. The short-term trend is indeterminate, and given the broader bearish bias ultimately at risk of resuming its downtrend. 

The recovery since the November lows has stalled and appears trapped in a range. The speed of ascent of the recovery is slower than the down move that preceded it – a further sign of weakness. 

A break below the December consolidation range lows at 0.8465 would probably indicate a resumption of the downtrend back down to the November lows at 0.8332. 

It would take a break above the major trendline for the downmove at around 0.8600 to confirm a change in the short-term trend and more upside. But the next target after that would be the 200-four-hour Simple Moving Average (SMA) not much higher at circa 0.8630.