USD/CHF forecast ahead of Fed decision and Swiss inflation data

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at He lives in Nairobi with his… read more.
on Nov 2, 2021
  • The USD/CHF pair has been under pressure lately.
  • The pair has dropped by more than 2.8% from its October high.
  • We explain what to expect ahead of the Fed decision and Swiss inflation.

The USD/CHF pair has been under intense pressure in the past few weeks as investors wait for the upcoming Federal Reserve interest rate decision and Swiss inflation data. The pair is trading at 0.9100, which is about 2.8% below the highest level in October. 

Swiss inflation data ahead

The Switzerland economy is doing relatively well as internal and external demand rises. On Monday, data by Procure showed that the Swiss manufacturing PMI declined from 68.1 to 65.1 in October this year. 

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Still, the figure was above the expansion zone of 50. It was also above that of most countries like the United States and the UK. The country’s companies complained about the rising cost of doing business and logistics challenges.

The biggest challenge for the Swiss National Bank (SNB) is that the country’s inflation has remained relatively low. The USD/CHF price will react to the latest CPI data, which will come out in the morning session. 

The data is expected to show that the headline consumer price index (CPI) declined from 0.2% in September to 0.1% in October. On a year-on-year basis, the CPI is expected to have risen from 0.9% to 1.0% in October.

The Swiss inflation is still significantly below the SNB’s target of 2.0%. At the same time, it has defied the so-called Philip’s curve. The curve states that inflation rises when the unemployment rate declines.

Fed decision and USD/CHF

Looking ahead, the next key catalyst for the USD/CHF price will be the upcoming Federal Reserve interest rate decision. The Fed will start its meeting on Tuesday and deliver the decision on Wednesday morning.

Economists expect that there will be a divergence between the Fed and the Swiss National Bank. The SNB is expected to remain dovish for a while in a bid to devalue the Swiss franc. 

On the other hand, the Federal Reserve is expected to turn relatively hawkish. Besides, US inflation has jumped sharply in the past few months. On Friday, data showed that the personal consumer expenditure (PCE) number rose to the highest level in 31 years. 

Therefore, the Fed will likely signal that interest rate hikes are coming. It will also possibly start tapering of its asset purchases.

The USD/CHF pair will also react to the latest US non-farm payrolls data scheduled on Friday. The data is expected to show that the US labour market tightened in October.

Therefore, there is a likelihood that the USD/CHF price will keep falling as investors react to the diverging views by the Fed and SNB.

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