USD/CHF drops below 0.8900 on downbeat US inflation data, focus shifts to PPI

• USD/CHF plunged more than 100 pips as US inflation eased more than anticipated.
• Soft US CPI data raises the likelihood of the Fed not increasing interest rates further.
• SNB Chairman Jordan suggested the room for more rate hikes in the future.

USD/CHF plunged sharply on Tuesday, more than 100 pips, due to the downbeat US inflation data. The USD/CHF pair seems to extend the losses, trading lower near 0.8890 during the Asian session on Wednesday.

US Bureau of Labor Statistics (BLS) revealed a lower-than-expected Consumer Price Index (CPI) data for October, with the annual rate easing at 3.2%, falling short of 3.3% as anticipated. US Core CPI saw a rise of 0.2%, below the expected 0.3%.

The soft US inflation reinforces the market sentiment regarding the US Federal Reserve (Fed) to hold off interest rate hikes in future meetings. It impacts the US Treasury yields, with 10-year bond yield taking a notable dip and standing at 4.43% and 2-year rate at 4.83% by the press time.

The Dollar Index (DXY) fell around 1.50%, reaching the region of 104.00. The sport bids around 104.10 at the time of writing. Market participants are likely awaiting the release of the US Producer Price Index and Retail Sales data for insights into the US economic overview. Should these figures align with expectations, it could intensify pressure on the Greenback.

On the Swiss side, Swiss National Bank (SNB) Chairman Thomas Jordan mentioned in an interview with local television station TeleZueri that he doesn't rule out the possibility of more interest rate hikes in the future.

Chairman Jordan said, “If we see that the current monetary policy is not restrictive enough to ensure price stability in the long term, then we will have to make another interest rate move.” “I'm not sure whether the terminal rate has been reached.”

As the month progresses, the Swiss ZEW Survey – Expectations and Real Retail Sales will be eyed, seeking insights into whether the Swiss National Bank (SNB) will contemplate an interest rate increase in the December meeting. The prevailing expectations seem to be leaning towards a 25 basis points hike.