• USD/CHF rises as the Swiss Franc weakens ahead of Foreign Currency Reserves data for September due on Wednesday.
• The US Dollar gained support as rising oil prices and Middle East supply risks could renew Fed rate-hike expectations.
• CME FedWatch tool suggests that markets price in roughly a 20% probability of a Fed rate hike in October.

USD/CHF extends its gains for the third consecutive day, trading around 0.8330 during Asian hours on Wednesday. Switzerland’s seasonally-adjusted Unemployment Rate was unchanged at 3.1% for the fifth month in a row in September. Foreign Currency Reserves for September will be eyed later in the day.

Franc support persists as France debt worries overshadow SNB policy shift

DBS strategists highlight that the recent bout of “softer US inflation and payrolls coincided with France’s sovereign debt concerns,” reinforcing demand for the Swiss Franc as a haven. They note that “EUR/CHF declined for a third consecutive week as widening French OAT-Bund spreads outweighed the Swiss National Bank’s decision to buck the global tightening cycle and to temper its CHF intervention rhetoric,” underlining how political and fiscal worries in France are dominating the currency’s reaction function despite the SNB’s more dovish stance.

The USD/CHF pair appreciates as the US Dollar (USD) gains support on a rebound in crude oil prices, driven by persistent Middle East supply risks, keeping inflationary concerns and rate-hike expectations firmly in focus.

However, the upside of the Greenback could be restrained as last week’s softer US labor market data weaken expectations for further Federal Reserve tightening. According to the CME FedWatch tool, interest-rate swaps reflect roughly a 20% probability of a rate hike at the Fed’s upcoming October meeting.

Fed’s Schmid flags AI-driven price pressures, keeps Dollar bulls focused on short-rate path

Fed’s Schmid speech scores 8/10 on the FXS Speechtracker, modestly above the 7.5/10 historical average, underscoring a slightly more hawkish tone relative to the established baseline. The emphasis that the labor force “remains in a good place” alongside frustration with persistent inflation and the assertion that AI is now one of the largest drivers of inflation highlights a focus on structural price pressures and the need to preserve Fed credibility. The remark that the Fed still has work to do on the short rate despite higher long-term yields reinforces expectations for a prolonged period of elevated policy rates, a backdrop typically supportive for the Dollar.

The FXS Fed Sentiment Index rose by 0.34 points to 137.91, keeping the gauge firmly in hawkish territory well above the neutral 100 mark. This incremental uptick, aligned with the stronger FXS Speechtracker score, signals a marginal but clear reinforcement of hawkish Fed expectations that should remain a tailwind for the Dollar against lower-yielding peers.