Swiss Franc Weakens as Fed Hike Bets Rise
The Swiss franc weakened past 0.82 per USD, reaching its lowest level so far in October, amid rising expectations of another Fed rate hike, which would further widen the interest rate differential between the US and Switzerland. A stronger-than-expected inflation reading and labour report lifted expectations of a Fed hike next month, boosting the greenback. By contrast, Swiss borrowing costs remain at the world's lowest, making the franc an attractive funding currency for carry trades. The shift weakens the franc as traders sell francs to pursue higher-yielding assets abroad. The SNB is expected to leave rates unchanged at its meeting next month. While markets anticipate a hike in early 2027, economists expect the first increase only in late 2027. Expectations of a hold are further supported by Chair Schlegel’s remarks which reinforced that Swiss inflationary pressures remain contained. Nevertheless, the franc's safe-haven status remains a key risk to carry trades.
The Swiss franc weakened past 0.82 per USD, reaching its lowest level so far in October, amid rising expectations of another Fed rate hike, which would further widen the interest rate differential between the US and Switzerland. A stronger-than-expected inflation reading and labour report lifted expectations of a Fed hike next month, boosting the greenback. By contrast, Swiss borrowing costs remain at the world's lowest, making the franc an attractive funding currency for carry trades. The shift weakens the franc as traders sell francs to pursue higher-yielding assets abroad.
The SNB is expected to leave rates unchanged at its meeting next month. While markets anticipate a hike in early 2027, economists expect the first increase only in late 2027. Expectations of a hold are further supported by Chair Schlegel’s remarks which reinforced that Swiss inflationary pressures remain contained. Nevertheless, the franc's safe-haven status remains a key risk to carry trades.