The Swiss Franc weakens despite improved economic sentiment as markets price a potential Fed rate hike in September.
The US Dollar remains near 13-month highs against the Swiss Franc, with USD/CHF trading just below 0.8200 and poised for a 1.3% monthly gain. The Swiss ZEW Economic Expectations Index surged to 10 in July, its highest since November, but the CHF continues to struggle.
The divergence between the Swiss National Bank’s neutral stance and the Federal Reserve’s potential tightening weighs on the Franc. The SNB is not expected to raise rates from 0%, while markets price a one-in-three chance of a Fed hike this week and a fully-priced 25bp increase in September.
Fed Chair Jerome Powell may signal further hikes due to persistent inflation risks, supporting USD demand. The FOMC concludes its two-day meeting Wednesday, with traders closely watching for hawkish cues.