Weak US CPI data drags USD/CHF lower to 8-year low

The USD/CHF pair has retreated to an 8-year low due to weak US CPI data, which indicates a more balanced supply-demand situation.

The Consumer Price Index shows inflation cooling, with core CPI indicating a more balanced supply-demand situation. With inflation above the Fed’s 2% target, odds for a significant rate increase shrink, pressuring the US dollar further.

The US Bureau of Labor Statistics (BLS) revealed that inflation in June in the US decelerated sharply, hitting 3.0% YoY, below estimates of 3.1%. Core CPI, which excludes volatile items like food and energy, downtick 0.5% from 5.3% YoY in May to 4.8% last month, indicating that supply and demand are more balanced.

Despite this, inflation remains above the Fed’s 2% target, and the odds for a 25 basis points rate increase in the July meeting are at 92.4%, with the chances for additional interest rate increases diminished below 30%. The USD/CHF pair extended its losses, with the major falling more than 100 pips of 1.30% in the day after hitting a daily high of 0.8794.

The Federal Reserve had crossed the wires earlier in the New York session, with Richmond Fed President Thomas Barking stating that inflation is too high and emphasizing the need for more action to tackle it. The US dollar Index, a gauge of the buck’s value against a basket of peers, remained downward pressured, exchanging hands near two-year lows.