Key points
- USD/CHF just above lows last seen in January 2015
- US headline, core CPI inflation slows to levels unseen since 2021
- US inflation data prints add to expectations of Fed rate peak in July
USD/CHF registered a fresh 8 1/2-year low on Thursday, after market players considered a surprisingly slow US CPI inflation as a signal that the Federal Reserve’s tightening cycle might be completed by month’s end.
Futures markets have fully priced a Fed rate hike later in July, but expectations of further tightening are being scaled back.
Annual headline CPI inflation in the US was reported to have slowed to 3% in June, or the lowest level since March 2021, from 4% in May. Market consensus had pointed to a drop to 3.1%.
Food and shelter inflation slowed, while energy prices plunged 16.7% YoY in June.
Annual core CPI inflation decelerated to 4.8% in June, or the lowest level since October 2021, from 5.3% in May. The median analyst estimate had pointed to a slower drop – to 5%.
“We think the recent dollar underperformance reflects a qualitative shift in market comfort with being short dollars as the terminal Fed policy rate looks increasingly capped,” Steve Englander, currency analyst at Standard Chartered, was quoted as saying by Reuters.
The US Dollar Index was last down 0.11% to 100.442, after earlier hitting 100.42 – its weakest level since April 2022.
The yield on US 2-year Treasury Notes was last at 4.677%, after rising to 5.12% a week earlier.
As of 7:09 GMT on Thursday USD/CHF was edging down 0.44% to trade at 0.8632. During the early phase of the European session the major Forex pair went down as low as 0.8627. The latter has been the pair’s weakest level since January 22nd 2015 (0.8516).
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