Swiss Franc gains after weak US PPI; SNB’s Schlegel signals cautious stance

• USD/CHF eases as soft US PPI data cements expectations of a Fed rate cut next week.
• Traders await Thursday’s US CPI, the final inflation checkpoint before the Fed decision.
• SNB’s Schlegel signals readiness to act if needed but keeps a high bar for negative rates.

The Swiss Franc (CHF) strengthens modestly against the US Dollar (USD) on Wednesday, with USD/CHF trimming intraday gains as the Greenback softens after softer-than-expected US Producer Price Index (PPI) figures further cemented market expectations that the Federal Reserve (Fed) will cut interest rates at its monetary policy meeting next week.

At the time of writing, the USD/CHF pair is trading around 0.7973 during the American session, easing from an intraday high of 0.7991 as buyers failed to secure a decisive move above the psychological 0.8000 mark. The loss of upward momentum reflects a broader pullback in the USD, with traders scaling back positions ahead of Thursday’s US Consumer Price Index (CPI) release.

The downside in USD/CHF comes as investors digest the August PPI report. Headline PPI fell 0.1% MoM, while forecasts had pointed to a 0.3% increase, and July’s reading was revised down to 0.7% from 0.9%. On an annual basis, headline inflation eased to 2.6% YoY, below the 3.3% forecast. Core PPI, excluding food and energy, also slipped 0.1% MoM compared to the expected 0.3% gain, while the annual rate slowed sharply to 2.8% from 3.7%.

Even though wholesale inflation is cooling, with both headline and core PPI softening, price growth still runs above the Fed’s 2% target. This keeps policymakers cautious, signaling that while a September rate cut looks almost certain, the pace of further easing will hinge on whether consumer inflation measures like CPI and Personal Consumption Expenditure (PCE) continue to show a sustained downtrend.

While US data has dominated market focus, developments in Switzerland are also shaping sentiment toward the pair. On Tuesday, Swiss National Bank (SNB) Chairman Martin Schlegel said in a speech in Vezia that the central bank would “not hesitate” to cut rates again if conditions warrant, but stressed that the bar for returning to negative rates remains very high due to the strain such policies place on savers and pension funds. He also unveiled new transparency measures, announcing that the SNB will publish summaries of its policy discussions four weeks after each decision, beginning with the September 25 meeting.

Schlegel’s remarks reinforced the perception that the SNB is comfortable with the Franc’s current strength and is in no rush to aggressively ease, even as inflation remains subdued within Switzerland.