Swiss Franc languishes at 16-month lows despite bright KOF leading Indicators data

USD/CHF hits fresh 16-month highs near 0.8340, unfazed by strong Swiss economic data.
The KOF Economic Barometer shows a favourable outlook, as its leading index hits six-year highs.
The US Dollar maintains its bid tone amid high Treasury yields and hopes of further Fed interest rate hikes.

Guillermo Alcala FXStreet

The Swiss Franc (CHF) extends losses for the fifth consecutive day against a firm US Dollar (USD) on Tuesday, unfazed by the unexpected improvement in the KOF leading Indicator report seen earlier in the day. The USD/CHF pair trades at 0.8330, just below the 16-month highs at 0.8339 hit earlier on the day, after rallying nearly 4% since late August.

The Swiss KOF leading Index has improved to 109.1 in September, its strongest reading in six years, following an upwardly revised 107.5 reading in August, and against expectations of a decline to 105.8. The report says that the economic outlook remains favourable, with the manufacturing, services and construction sectors showing particularly positive developments, while foreign demand and financial and insurance services have weakened slightly.

The US Dollar remains unbeatable amid strong data, Fed hiking bets

The US Dollar remains strong, buoyed by a mix of strong macroeconomic data, which has resurfaced the idea of US exceptionality, higher US Treasury yields, and growing hopes that the US Federal Reserve (Fed) will hike interest rates at least once more before year-end.

Fed Governor Lisa Cook endorsed those views on Monday, affirming that she expects “to see continued inflation pressure in coming months, from artificial intelligence and conflict in the Middle East.” More Fed speakers are scheduled on Tuesday, although the highlights of the week will be the US Personal Consumption Expenditures (PCE) Price Index, due on Wednesday, and Friday’s Nonfarm Payrolls report, which will be carefully analysed from a monetary policy perspective.

Strategists at Rabobank observe that speculative positioning in the Dollar has shown little net change, with “USD net longs are largely unchanged as both long and short positions increased by 2,000 positions, respectively.” Looking ahead, market-derived rate expectations remain firmly tilted toward further tightening, as “the OIS curve suggests investors are still positioned for more than three hikes by the end of next year,” says Rabobank in a note.

Economic Indicator

KOF Leading Indicator

The KOF Swiss Leading Indicator is released by the Konjunkturforschungsstelle Swiss Institute for Business Cycle Research and it's a joint survey with leading indicator which measures future trends of the overall economic activity. It captures the movement of GDP growth and the economic trend in Switzerland. An optimistic view is considered as bullish for the CHF, whereas a pessimistic view is considered as bearish.

AUD/USD hits nine-week lows below 0.7000 on RBA Bullock's remarks

AUD/USD reverses a brief uptick and turns lower to hit nine-week lows below 0.7000 in the European morning on Tuesday, as traders digest cautious remarks from Reserve Bank of Australia (RBA) Governor Michele Bullock during the press conference. Earlier on, the RBA raised the cash rate to 4.60%, as widely expected, leaving the door open to further rate hikes if needed.

USD/JPY consolidates near 157.50 as a bullish USD counters intervention risks

USD/JPY struggles to capitalize on the overnight bounce from a one-week low, consolidating around 157.50 in the Asian session on Tuesday. Trump's concerns about the Japanese Yen's weakness fueled speculation about another US-Japan joint intervention. This, along with the hawkish BoJ, underpins the JPY and caps the currency pair. Meanwhile, rising Fed rate-hike bets and oil-driven inflation fears continue to push US bond yields to multi-year highs, keeping the US Dollar pinned near a two-month high and supporting the pair.

Gold seems vulnerable near eight-week low amid Fed hike bets

Gold struggles to capitalize on a modest Asian session uptick, trading near its lowest level since August 4, around the $4,100 neighborhood, touched the previous day. Moreover, the bearish fundamental backdrop suggests that the path of least resistance for the precious metal remains to the downside.

Chainlink trims gains after CCIP 2.0 launch, Swift ledger integration

Chainlink (LINK) edges below $15.00 on Tuesday, trimming its 10% gains from the previous day, driven by the launch of its new Cross-Chain Interoperability Protocol 2.0 and Swift ledger integration for tokenized deposits and 24/7 cross-border payments.

Focus turns to US job openings

In the euro area, focus turns to the September flash inflation print for Spain which will give the first indication of where the euro area data on Friday lands. We expect a modest rise in headline due to higher energy costs and a small increase in core inflation. We also receive the European Commission's business survey for September.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Fed and the BoJ have just done something remarkably similar. Both central banks raised interest rates by 25 bps last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.