The USD/CHF pair experiences a decline as the US Dollar shows signs of weakening, attributed to a decrease in safe-haven demand. An agreement between Iran and Oman regarding shipping routes in the Strait of Hormuz has heightened expectations for a boost in energy flows from the Middle East. Swiss inflation unexpectedly declined to 0.4% in July, contradicting the Swiss National Bank’s projections for a modest increase. USD/CHF extends its losses for the third consecutive day, trading around 0.8060 during the Asian hours on Thursday. The pair depreciates as the US Dollar encounters challenges stemming from a reduction in safe-haven demand. Market sentiment shifted following reports that Iran and Oman have reached an agreement on a shipping route through the Strait of Hormuz, thereby enhancing expectations for increased energy flows from the Middle East. The joint Iran-Oman statement is presently undergoing its final drafting phase. Simultaneously, the anticipated route is projected to function for a duration of two to four months; Tehran underscored that the agreement does not signify a full resumption of the vital waterway.
Strategists note that recent US employment data indicates a labour market that is “tight but not necessarily adding to inflation pressure at the moment”—a scenario they characterise as “a mild negative for the USD perhaps.” In their assessment, the lack of a distinct inflationary impetus from employment figures diminishes marginal support for the Dollar, further solidifying the subdued sentiment that has surfaced in the wake of the recent FOMC-induced selloff. ADP data released on Wednesday indicated that US private-sector employment experienced an increase of only 44K jobs in July, a decline from the 98K recorded in June and falling short of the market consensus of 70K. Traders are currently paying close attention to Thursday’s US Initial Jobless Claims and Friday’s Nonfarm Payrolls report. Fed’s Daly conveyed a message of moderate caution, reflected in an FXS Speechtracker score of 5.4 out of 10, which is slightly below the historical average of 5.6 out of 10.
Daly highlighted that tariffs had a clear impact on inflation but sees some evidence that this effect is beginning to fade, while noting that technology investment is currently adding upward pressure on prices. Daly emphasised that supply shocks, including the Middle East war, are viewed as predominantly temporary for inflation, with longer-run expectations remaining well anchored but not to be assumed as a given, and advocated for maintaining rates steady in July while awaiting further data. The FXS Fed Sentiment Index decreased by 2.23 points to 138.69, indicating a slight retreat in perceived hawkishness after the speech. Despite the decline, the index remains firmly in hawkish territory above 100, indicating that markets still perceive the Fed as biased toward tighter policy, even as the tone in the FXS Speechtracker edged slightly closer to neutral.
Swiss inflation decreased to a four-month low of 0.4% in July, a decline from 0.5% in June, surprising the Swiss National Bank, which had expected a modest rise in inflation following its decision to maintain the policy rate at 0%. However, the SNB is anticipated to maintain interest rates at their current levels until the year’s conclusion, considering further rate reductions as a contingency rather than a primary approach, in light of the persistent stability of Swiss banks.