USD/CHF rises as US data bolsters sentiment, rate cut expectations

• USD/CHF rises as US activity data and consumer sentiment improve modestly.
• The Michigan Consumer Sentiment Index climbs to 51 in November, while inflation expectations ease.
• Fed officials reinforce the case for a rate cut in the coming months despite lingering caution.

USD/CHF trades around 0.8070 on Friday, up 0.10% on the day at the time of writing, as the US Dollar (USD) finds moderate support from mixed but generally resilient US data releases. While the pair advances, markets continue to price a higher likelihood of policy easing from the Federal Reserve (Fed) in the coming months.

The S&P Global Composite Purchasing Managers Index (PMI) rose slightly to 54.8 in November from 54.6, signalling continued growth in private-sector activity. The Services PMI improved to 55, while the Manufacturing PMI slid to 51.9, suggesting softer but still positive momentum in the goods sector. The indicators point to an economy that is still expanding.

Consumer data also offered a constructive signal. The Michigan Consumer Sentiment Index increased to 51 in November, above expectations of 50.5 and the previous 50.3 reading. Meanwhile, the 5-year Consumer Inflation Expectation eased to 3.4% from 3.6% previously, a development likely welcomed by the Fed as it seeks confirmation that inflation pressures are continuing to moderate.

These figures come alongside a new round of remarks from Fed officials shaping the policy outlook. John Williams highlighted that there is still room for a near-term rate cut, noting that progress on inflation has stalled but should return to the 2% target over the next years. His comments triggered a renewed repricing in interest rate expectations, with markets assigning a strong probability to a December cut. According to the CME FedWatch tool, markets now assign nearly a 74% chance to a December rate cut, a sharp jump from roughly 31% earlier in the day.

Several other policymakers offered a more cautious tone. Boston Fed President Susan Collins acknowledged that inflation remains elevated and argued that it is too early to move “too quickly,” even as she expects rates to fall over time. Fed Governor Stephen Miran emphasised that the central bank should be “forecast-dependent rather than data-dependent,” adding that he would support a 25-basis-point reduction if his vote were decisive. By contrast, Dallas Fed President Lorie Logan insisted that another cut in December would be difficult to justify, stressing the need to keep rates steady long enough to assess the degree of policy restraint.

In Switzerland, the Swiss Franc (CHF) remains broadly stable, with policymakers at the Swiss National Bank (SNB) reiterating that the threshold for a return to negative rates remains high, although they remain ready to adjust policy if needed. With the SNB expected to keep rates unchanged in December, the narrowing policy spread between the Fed and the SNB is shaping market expectations for USD/CHF in the near term.