Swiss Franc gives back gains, but US Dollar struggles with Inflation data on tap

On Thursday, the Swiss Franc (CHF) receded from its previous daily gains against the US Dollar (USD), trading above the 0.8100 mark but still within the weekly trading range. The Swiss Franc is grappling with a mismatch in monetary policies between the Swiss National Bank (SNB) and other major central banks, while the US Dollar is facing uncertainty ahead of US inflation data release.

The market is cautious due to rising oil prices nearing $100, which may push global yields higher and risk a global recession. Hostilities between the US and Iran have raised concerns about the conflict's resolution. US inflation figures are awaited to gauge the Federal Reserve's (Fed) potential rate hike next week, with 60% of market participants believing a hike is imminent.

The US Producer Price Index (PPI) is projected to show a 5.3% year-over-year increase in August, while the core PPI rose to 4.6% in the same period. While US volatility is expected to stay limited, the upcoming Consumer Price Index (CPI) report on Friday will be closely watched. DBS Group Research's Philip Wee suggests that a stronger US inflation print could boost the USD, but current global factors limit near-term gains in the USD.

In Switzerland, economic data this week has been limited, yet last week's figures indicated retail consumption and consumer inflation exceeded expectations, with GDP growing at its fastest rate in five years in Q2. Nonetheless, these data points do not imply the SNB will adjust interest rates in 2023 and 2024, limiting the positive impact on the Swiss Franc.