USD/CHF Dips to 0.8400 as US Dollar Weakens on Softer US Inflation Data

USD/CHF pulled back to the key 0.8400 level during North American trading on May 13, 2025, as the US Dollar came under pressure following the release of April’s US Consumer Price Index (CPI) data, which revealed a slower-than-expected rise in inflation. Despite the cooling price pressures, market expectations for the Federal Reserve to maintain steady interest rates in June held firm, while the Swiss Franc strengthened, breaking above its 20-day Exponential Moving Average (EMA). This report explores the dynamics behind the pair’s correction, the implications of the CPI data, and the technical outlook for USD/CHF.

The US CPI report indicated headline inflation grew at a modest 2.3% year-over-year, falling short of both forecasts and the prior month’s 2.4%, while core CPI, excluding food and energy, rose as expected by 2.8%. This softer inflation data prompted a retreat in the US Dollar Index (DXY), which slipped to 101.30 from a monthly peak of 102.00 recorded the previous day. The Dollar’s decline reflects a shift in market sentiment, though expectations for Federal Reserve policy remain unchanged, with a 61.4% probability of rates staying at 4.25%-4.50% in July, as per market tools, despite recent optimism from a US-China 90-day tariff reduction agreement.

The Swiss Franc, meanwhile, gained ground against most currencies, except for antipodean pairs, showcasing resilience amid the Dollar’s weakness. The USD/CHF pair’s correction aligns with broader market reactions to the US inflation figures, which, while easing, did not significantly alter the Fed’s anticipated policy stance. This comes after traders scaled back expectations of a dovish Fed shift following Monday’s US-China tariff deal, which lowered tariffs by 115%, a move that had initially bolstered the Dollar but now appears overshadowed by domestic economic indicators signaling tempered inflationary pressures.

Technically, USD/CHF’s retreat to 0.8400 highlights a pause in its recent momentum, though the pair remains above the 20-day EMA, signaling a persistent uptrend. The break above this key moving average suggests underlying strength for the Swiss Franc, potentially setting the stage for further gains if the Dollar continues to face headwinds. As markets digest the CPI data, the pair’s next moves will likely hinge on upcoming US economic releases and any shifts in global risk sentiment, with the Swiss Franc poised to capitalize on any sustained Dollar’s softness.