USD/CHF edges higher as USD rebounds, mixed US data and inflation risks in focus

USD/CHF edges higher on Thursday as the US Dollar (USD) stages a modest recovery after eight consecutive days of losses, putting pressure on the Swiss Franc (CHF). At the time of writing, the pair is trading around 0.7828, up nearly 0.11% on the day.

The move higher comes as the US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, rebounds to around 98.20 after touching an intraday low of 97.83, though it remains near six-week lows reached earlier this week.

The uptick in the US Dollar appears largely technical following its recent decline, as risk appetite remains supported by cautious optimism surrounding US-Iran negotiations, reducing safe-haven flows into the Greenback.

Markets remain hopeful that a diplomatic breakthrough could be reached, with a second round of talks potentially taking place this week as Pakistan continues to push for negotiations. However, uncertainty persists, with fundamental disagreements over nuclear issues still unresolved.

At the same time, rhetoric remains firm, with US Defense Secretary Pete Hegseth warning that military forces are ready to resume combat if Tehran does not agree to a deal, as the current truce is set to expire next week.

Meanwhile, Oil-driven inflation risks remain front and center. Swiss National Bank (SNB) President Martin Schlegel said on Wednesday that “uncertainty regarding the inflation outlook is currently quite high,” noting that Switzerland’s exposure to external shocks has important implications for monetary policy. He added that “if second-round effects become apparent, central banks should act early and decisively.

Markets also digested the SNB’s March meeting minutes, which indicated that Swiss inflation is likely to increase in the short term due to higher energy prices, but is expected to remain within a range consistent with price stability.

In the United States, Federal Reserve (Fed) Bank of New York President John Williams said the Middle East conflict is already lifting inflation, adding that policy is “well positioned” despite challenges. Williams expects inflation to rise to around 2.75%-3% this year.

On the data front, Initial Jobless Claims fell to 207K, below forecasts of 215K, while Industrial Production dropped 0.5% MoM in March, missing expectations of a 0.1% rise and reversing the prior 0.7% increase.