Swiss Franc Slips Versus Dollar as Hotter-Than-Expected PCE Inflation Bolsters Greenback

The Swiss franc weakened against the U.S. dollar on Wednesday after fresh American inflation data came in above forecasts, reviving demand for the greenback. Market participants are also monitoring escalating tensions in the Middle East. At the time of writing, USD/CHF was trading near 0.8052, a gain of approximately 0.47% on the session.

The headline Personal Consumption Expenditures (PCE) price index rose 0.2% month-over-month in July, surpassing the 0.1% consensus estimate and reversing June’s 0.1% decline. On an annual basis, headline inflation held at 3.7%, exceeding the 3.6% projection.

Meanwhile, the core PCE price index—the Federal Reserve’s preferred gauge of underlying inflation—increased 0.2% month-over-month, matching expectations but accelerating from the 0.1% rise recorded in June. Annual core inflation remained steady at 3.3%, in line with forecasts.

While the figures reinforce expectations that the Fed will keep interest rates unchanged at its next policy meeting, inflation remains well above the central bank’s 2% target. Simultaneously, geopolitical tensions in the Middle East are keeping oil prices elevated and clouding the inflation outlook, leaving the door open for a potential rate hike down the road.

The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, traded around 99.16, up nearly 0.25% on the day. The dollar had come under pressure last week after the U.S. Treasury unexpectedly announced an increase in buybacks of longer-dated government securities, rekindling concerns about rising debt and fiscal credibility.

On the geopolitical front, Iran and Oman have yet to finalize an agreement covering transit through the Strait of Hormuz, a senior Iranian source told Reuters. Tehran maintains that the U.S. must lift its naval blockade and that the conflict must end before normal shipping through the vital waterway can resume.

U.S. President Donald Trump also told Al Jazeera that there is no timetable to resume peace talks with Iran, adding that both economic pressure and military action are proving effective.

On the Swiss side, the ZEW Survey Expectations Index improved to 12.1 in August from 10.0 previously. However, Switzerland’s subdued inflation environment supports expectations that the Swiss National Bank (SNB) will maintain its policy rate at 0% throughout the year, limiting upside potential for the franc.

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