Swiss Franc nears monthly lows as investors brace for US CPI data

The Swiss Franc is experiencing its weakest performance in a month as investors anticipate the release of US Consumer Price Index (CPI) data, according to recent wire material. The USD/CHF currency pair has climbed nearly 0.7% in the last two days, buoyed by rising global yields and the anticipated quarter-point Federal Reserve rate hike.

On Thursday, the Producer Price Index (PPI) surged by 5.4% year-on-year in August, up from 4.8% in July, while the Core PPI expanded by 4.6% year-on-year from 4.3% in the previous month. These figures have prompted investors to increase their bets on a Fed rate hike next week to a 70% probability, up from below 60% last week. The focus of Friday's market will be the US CPI data, which is expected to reveal a moderate rise in consumer inflation, with the yearly rate remaining steady at 3.4%, above the Fed's 2% target.

ING strategist Francesco Pesole notes that the Dollar is currently "tentatively re-establishing a positive correlation with long-end yields," influenced by the smaller-than-expected $6bn Treasury buyback. The US Treasury Secretary's reluctance to intervene in the bond market is also seen as crucial for the positive USD-back-end rates correlation to regain strength.

Pesole expects USD risks to shift to the upside if oil prices recover, having risen around 15% since the previous data release. A softer CPI print could potentially weaken the dollar and prevent the September hike pricing from falling below 50%, which could encourage FOMC members to support an increase.