USD/CHF drops below 0.9100 as US Dollar depreciates ahead of US PPI data

• USD/CHF extends its losses as the US Dollar continues to lose ground for the third successive session on Thursday.
• Stronger-than-expected US inflation in January has increased the likelihood of the Fed keeping current interest rates for an extended period.
• Swiss CPI dropped to 0.4% YoY in January 2025, its lowest level since April 2021.

USD/CHF depreciates approximately 0.50%, trading around 0.9080 during the European hours on Thursday. The decline of the pair could be attributed to weaker US Dollar (USD). The US Dollar Index (DXY), which measures the USD's value against six major currencies, extends its losses for the third successive session and trades around 107.70 at the time of writing. Traders await the US Producer Price Index (PPI) inflation due later in the day.

In economic data, the US Bureau of Labor Statistics reported on Wednesday that the Consumer Price Index (CPI) rose 3.0% year-over-year in January, surpassing the expected 2.9%. Core CPI, which excludes food and energy, increased to 3.3% from 3.2%, exceeding the forecast of 3.1%. On a monthly basis, headline inflation accelerated to 0.5% in January from 0.4% in December, while core CPI climbed to 0.4% from 0.2%.

Stronger-than-expected US inflation data has reinforced expectations that the Federal Reserve (Fed) will keep interest rates at 4.25%-4.50% for an extended period. According to the CME FedWatch Tool, the likelihood of a Fed rate cut in June has now dropped to nearly 30%.

Fed Chair Jerome Powell noted that while inflation has moderated, the central bank still has work to do. Speaking on Tuesday, Powell emphasized that the Fed is in no rush to cut interest rates, citing continued strength in the labor market and solid economic growth.

The Swiss Franc (CHF), known as a safe-haven currency, may have strengthened amid rising geopolitical tensions in the Middle East. Israeli Prime Minister Benjamin Netanyahu announced late Tuesday that the ceasefire would end, and Israel would resume "intense fighting" in Gaza if Hamas failed to release "our hostages" by Saturday noon.

On Thursday, Switzerland's Consumer Price Index (CPI) fell to 0.4% year-over-year in January 2025, aligning with market expectations and down from 0.6% in December. This marks the lowest level since April 2021. On a monthly basis, the CPI declined by 0.1%, maintaining the same pace as the previous period.