Swiss Franc pares gains as Swiss producer inflation data disappoints

• USD/CHF returns to levels above 0.8300 after a nearly 1.4% selloff from Wednesday's highs.
• US CPI beat expectations, but dovish comments from Fed officials sent the US Dollar tumbling.
• Soft Swiss Producer and Import Prices have failed to support the CHF.

The Swiss Franc (CHF) is giving back gains against the US Dollar (USD) on Thursday. The USD/CHF pair has returned to levels just above 0.8300, after a nearly 1.4% sell-off to 0.8280 lows on Wednesday following dovish comments from Fed officials, while, in Switzerland, soft Producer and Import Prices Index figures have failed to support the CHF.

Data from the Federal Statistics Office released on Thursday revealed that Swiss Producer and Import Prices growth slowed down to 0.3% in September, from 0.7% in August, below the 0.5%expected by the market. Year-over-year, producer prices contracted 0.2%, following a 0.7% decline in the previous month.

These figures add to evidence of the tame inflationary pressures in the Swiss economy, which have allowed the Swiss National Bank (SNB) to maintain its benchmark interest rate at the 0% level amid a global tightening cycle. This has led to a monetary policy divergence with most of the world’s major central banks, weighing heavily on the CHF, which has depreciated 3.5% against the US Dollar in two-and-a-half months.

Fed officials play down hopes of back-to-back rate hikes

The US Dollar, on the other hand, was hit on Wednesday as Federal Reserve officials hammered investors’ hopes of back-to-back interest rate hikes, following hot US Consumer Price Index (CPI) data.

The Fed Vice Chair for Supervision, Michelle Bowman, suggested that the bank might need more time to assess the impact of September’s rate hike before raising interest rates further. In a similar tone, San Francisco Fed President Mary Daly said that more rate hikes are likely needed but that “the timing of those adjustments ​to me is something we’re still deliberating." 

Previously, US CPI data confirmed that the high energy prices are pushing consumer inflation to levels well above the central bank’s 2% target. Later on Thursday, the market will be looking at the Producer Price Index (PPI) release for a more accurate picture of inflationary trends.