Swiss Franc steadies as stronger inflation offsets broad US Dollar demand

The Swiss Franc steadied on Thursday as stronger inflation provided support to the currency, while a resilient US Dollar maintained the pair near levels last observed in May 2025. The USD/CHF traded around 0.8354, after peaking at 0.8382 intraday. The US Dollar reached a fresh year-to-date high due to elevated Treasury yields and traders evaluating the Federal Reserve's monetary policy trajectory following recent economic data.

Meanwhile, concerns over the US fiscal and debt outlook weighed on the bond market. The US Dollar Index, tracking the Greenback's value against six major currencies, hovered around 101.75 after hitting a yearly high of 101.99. The 10-year US Treasury yield stood at 5.32%, its highest level since 2002. Employment data revealed a decrease in Initial Jobless Claims to 197K, below expectations, and private-sector employment increased by 90K in September.

Second-quarter US GDP was revised upward to 2.2%. Despite these positive signs, traders scaled back expectations for an October Fed rate hike following weaker-than-expected US PCE inflation data. Core PCE inflation rose 0.2% month-over-month in August, below forecasts, while the annual rate remained steady at 3.0%. FedWatch Tool indicated a 36% chance of a rate hike at the October meeting, down from 70% earlier in the week.

Fed officials expressed concerns about inflation exceeding the 2% target, with high energy prices adding to upside risks due to ongoing US-Iran negotiations. The Swiss National Bank kept its policy rate unchanged at 0% during its September meeting, with annual inflation rising to 1.0% from 0.8% in August.