• USD/CHF holds steady after Swiss Real Retail Sales rose 2.3% year-over-year in July, beating expectations.
• All surveyed bankers expect the Swiss National Bank to keep its policy rate at 0% through year-end.
• Traders boosted September Fed rate hike bets after officials warned inflation must consistently reach its 2% target.

USD/CHF appreciates after registering losses in the previous day, trading around 0.8100 during the Asian hours on Tuesday. The pair remains steady despite stronger-than-expected Swiss economic data. July Real Retail Sales expanded by 2.3% year-over-year, outperforming the forecasted 1.3% gain and building on June’s upwardly revised 1.9% growth rate. SVME – Purchasing Managers’ Index will be eyed later in the day.

According to a Swiss Bankers Association survey, all respondents expect the Swiss National Bank (SNB) to maintain its policy rate at 0% through year-end. Markets now price in a first rate hike in June 2027, whereas most economists project the initial increase in early 2028. This extended period of low rates could make the Swiss Franc (CHF) increasingly attractive as a funding currency for carry trades.

The USD/CHF pair gains as the US Dollar (USD) rebounds, driven by hawkish sentiment surrounding the Federal Reserve (Fed). Traders have sharply increased their bets on a September rate hike following remarks from Fed officials indicating that more work remains if inflation does not consistently return to the 2% target.

Reflecting this shift, the CME FedWatch Tool now prices in a greater than 66% probability of a rate hike in September, up significantly from roughly 41% just a week ago. Investors are closely monitoring a busy economic calendar for further policy cues, with upcoming US manufacturing and services sector data paving the way for Friday’s crucial August Nonfarm Payrolls report.

US political pressure clouds Fed policy outlook

Analysts at BNP Paribas highlight rising political headwinds for US monetary policy, noting that “in the United States, President Trump has been relentlessly attacking the Federal Reserve and its leadership out of anger that they have not cut interest rates more.” They add that financial markets have been left questioning the central bank’s resolve, observing that “financial markets have been unsure whether the Chairman he appointed will deliver the policy tightening that appears likely to be needed to restore price stability.”