USD/CHF edges lower amid steady SNB stance and softer US Dollar

• USD/CHF pares earlier gains as the US Dollar loses momentum after a brief rebound.
• Traders digest the Swiss National Bank’s Q4 Quarterly Bulletin, which reaffirmed a steady policy stance.
• Dovish Fed expectations cap the US Dollar, with focus turning to Thursday’s US CPI report.

The Swiss Franc (CHF) regains ground against the US Dollar (USD) on Wednesday, with USD/CHF trimming earlier gains as the Greenback’s rebound loses momentum and traders digest the Swiss National Bank’s (SNB) Quarterly Bulletin for the fourth quarter. At the time of writing, USD/CHF is trading around 0.7936, easing after climbing to a daily high near 0.7987.

In its latest assessment, the SNB reiterated that it kept its policy rate unchanged at 0% at the December meeting, judging that inflation pressures over the medium term remain broadly stable. The central bank said its current stance is still appropriate to keep inflation within its price-stability range while supporting the economy. It also reaffirmed that it stands ready to intervene in the foreign-exchange market if needed.

While inflation has eased slightly in recent months, the SNB noted that the overall inflation outlook has not changed enough to justify a policy shift at this stage. Consumer price inflation slowed to 0.0% in November, while both short-term and longer-term inflation expectations remain well anchored and within the SNB’s definition of price stability.

Looking at domestic conditions, the SNB flagged subdued economic momentum in Switzerland, with overall growth remaining weak in the third quarter. While activity softened, the central bank noted tentative signs of improvement heading into the final months of the year, helped by a slightly better global backdrop and easing trade-related uncertainty.

The Bulletin also pointed to cooling labour market conditions. Employment growth stalled in the third quarter, while unemployment continued to edge higher in recent months, with the seasonally adjusted jobless rate rising to around 3.0% in November.

On the United States (US) side, dovish Federal Reserve (Fed) expectations continue to limit any meaningful recovery in the US Dollar. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is trading around 98.30, edging lower after touching an intraday high near 98.64.

The US economic calendar is relatively light on Wednesday, leaving markets focused on Thursday’s Consumer Price Index (CPI) report for fresh clues on the Fed’s monetary policy outlook.

Earlier in the day, Fed Governor Christopher Waller, a potential candidate to lead the central bank, struck a dovish tone on interest rates, signalling that policymakers are in no hurry to ease aggressively. He said the Fed can proceed cautiously as inflation remains above target, noting that rates can be lowered gradually toward a neutral setting. “Because inflation is still elevated, we can take our time — there’s no rush,” Waller said at a CNBC forum, according to Bloomberg.