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USD/CHF trades mixed as US inflation, Fed independence concerns weigh on Dollar

  • US headline CPI comes in line with expectations,  while core inflation softened modestly.
  • Tensions surrounding Fed independence continue to weigh on the US Dollar.
  • The Swiss Franc benefits from geopolitical and institutional uncertainty.

USD/CHF trades around 0.7980 on Tuesday at the time of writing, up 0.10% on the day, but off its intraday high following the release of US inflation data. The pair reacted moderately to the macroeconomic figures, as markets remain torn between inflation data, which remains stable, and a political backdrop that continues to weigh on the US Dollar (USD).

The US headline Consumer Price Index (CPI) rose 2.7% YoY in December, according to the Bureau of Labor Statistics (BLS), matching November’s increase and fully in line with market forecasts. However, core Consumer Price Index, which excludes the volatile food and energy components, remained unchanged at 2.6% on an annual basis, missing expectations of an increase to 2.7%. On a monthly basis, headline CPI increased by 0.3%, while core CPI rose by 0.2%. The report highlights that shelter costs remain the main driver of monthly inflation, while food and energy prices also recorded moderate increases.

These figures reinforce the view of a gradual but incomplete disinflation process, leaving limited room for the Federal Reserve (Fed) to quickly alter its monetary policy path. Markets are now pricing in around a 95% chance that the Fed will keep interest rates unchanged at its January meeting, while expectations for a rate cut as early as March have dropped sharply in recent days, according to the CME FedWatch tool.

At the same time, labor market indicators are sending mixed signals. The four-week average of weekly private employment changes reported by Automatic Data Processing (ADP) edged up to 11,750 jobs per week in mid-December, from 11,000 previously. This confirms that job creation in the US private sector remains positive, but at a modest pace, insufficient to fully dispel concerns about an economic slowdown.

The US Dollar, however, remains undermined by non-economic factors. Reports of a criminal investigation targeting Fed Chair Jerome Powell have reignited concerns about the central bank’s independence. This situation is part of a long-running conflict between US President Donald Trump and the Fed Chair, fueling institutional unease that weighs on monetary policy credibility. Several major central banks have issued a joint statement in support of Jerome Powell, underlining the importance of central bank independence.

Credit rating agencies are closely monitoring developments. Fitch Ratings recalled that Federal Reserve independence is a key pillar supporting the US sovereign rating, while S&P Global Ratings also stressed that Fed credibility is a cornerstone of US institutional strength. These statements contribute to keeping a political risk premium embedded in the US Dollar.

In this environment, the Swiss Franc (CHF) continues to benefit from sustained safe-haven demand, driven by both geopolitical tensions and doubts surrounding US monetary governance.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.

USDEURGBPJPYCADAUDNZDCHF
USD-0.01%-0.02%0.48%-0.05%0.05%0.01%0.07%
EUR0.01%-0.01%0.50%-0.04%0.05%0.03%0.08%
GBP0.02%0.00%0.51%-0.03%0.06%0.04%0.09%
JPY-0.48%-0.50%-0.51%-0.52%-0.42%-0.46%-0.40%
CAD0.05%0.04%0.03%0.52%0.10%0.06%0.12%
AUD-0.05%-0.05%-0.06%0.42%-0.10%-0.03%-0.00%
NZD-0.01%-0.03%-0.04%0.46%-0.06%0.03%0.06%
CHF-0.07%-0.08%-0.09%0.40%-0.12%0.00%-0.06%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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