USD/CHF: Swiss franc on edge as SNB rate cut bets rise

The Swiss franc continued its strong sell-off after the latest Swiss inflation data. The USD/CHF exchange rate went vertical and reached a high of 0.8812, its highest point since December 8th. It has jumped by more than 5.75% from its lowest point this month.

The USD to CHF exchange rate continued rising this week after the weak Swiss inflation data. According to the country’s statistics agency, the headline Consumer Price Index (CPI) rose by 1.3% in January from the previous 1.7%. This increase was much lower than the median estimate of 1.7%.

Swiss inflation rose by 0.2% from the previous month also lower than the median estimate of 0.6%. It means that consumer prices are heading in the right direction.

Most importantly, these numbers mean that the Swiss National Bank could start cutting interest rates as early as on March 21st since prices have moved below its target of 2.0%. Also, the Swiss franc remains at an elevated level than the bank’s comfortable level.

The next important USD/CHF news will be the upcoming US inflation data. These numbers will provide more information about what to expect from the Federal Reserve. Economists expect the data to show that the headline CPI dropped to 2.9% in January. Core inflation is expected to move to 3.8%.

The US inflation figures will come a few days after the country published a strong jobs report. Therefore, a strong inflation report means that the Fed will continue to wait for longer before starting to cut interest rates. The base case among many analysts is that the bank will cut rates in June.

In recent statements, central bank officials like Tom Barkin and Michele Bowman have insisted that the bank will be patient when making its decision on cuts.

USDCHF chart by TradingView

The USD to CHF exchange rate continued its strong rally this week after the weak Swiss inflation numbers. As it jumped, the pair managed to flip the crucial resistance at 0.8727, its highest point on January 23rd. The pair has risen above the 50-day moving average.

Further, the Relative Strength Index (RSI) is nearing the overbought point at 70. The MACD indicator have moved above the neutral point. Therefore, the outlook for the pair is bullish, with the next point to watch being at 0.900. This price is about 2.27% above the current level.

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