USD/CHF falls to near 0.7950, awaits updates on US government shutdown risks

• USD/CHF loses ground as the Greenback extends its losses due to US government shutdown risks.

• The US August inflation report increased the likelihood of the Fed delivering a rate cut in October.

• Traders expect the SNB to keep rates to stay at zero through next year amid low domestic inflation.

USD/CHF extends its gains for the second successive session, trading around 0.7960 during the Asian hours on Monday. The pair depreciates as the US Dollar (USD) continues to lose ground amid market caution, driven by shutdown risks of the United States (US) government.

US President Donald Trump is set to meet congressional leaders on Monday to discuss government funding. The shutdown could begin on October 1 in case of no deal, which will also coincide with new tariffs on trucks, pharmaceuticals, and more. The standoff could also delay the September payrolls report and other key data, per Reuters.

The US Dollar (USD) loses ground after the US August inflation report boosted the likelihood that the US Federal Reserve (Fed) will likely deliver another interest rate cut in October. Markets are now pricing in nearly an 88% chance of a Fed rate cut in October and a 65% possibility of another reduction in December, according to the CME FedWatch Tool.

The US Personal Consumption Expenditures (PCE) Price Index rose 2.7% year-over-year in August, as expected. The precious reading was a 2.6% increase. Meanwhile, the core PCE, which excludes food and energy prices, came in at 2.9% YoY during the same period, also matching expectations.

Last week, the Swiss National Bank (SNB) held its policy rate at 0%, pausing after six cuts since March 2024. Economists largely see the easing cycle as over, expecting rates to stay at zero through next year amid low domestic inflation and risks from slowing global growth and trade tensions.