USD/CHF consolidates near two-month lows with traders eyeing Fed-SNB cues

• USD/CHF holds steady near 0.8115 as traders brace for Fed and SNB rate verdicts this week.
• Swiss producer and import prices fell further in May, reinforcing expectations for a SNB interest-rate cut.
• The KOF trims Swiss 2026 GDP forecast to 1.5%, citing erratic US trade policy as a drag.
• The Fed is expected to hold rates steady on Wednesday, while the SNB is likely to cut rates by 25 bps to 0% on Thursday.

The Swiss Franc (CHF) is holding steady against the US Dollar (USD) on Monday, even as the US Dollar Index (DXY) slips back below 98.00, with traders brace for a relatively calm start to a week full of central bank decisions and the context of an escalating war between Israel and Iran..

The USD/CHF pair is hovering around 0.8115 during the European session, holding within a narrow range between 0.8110 and 0.8130 after bouncing back from Friday's dip to a two-month low near 0.8056.  Market participants remain cautious, keeping positions light ahead of this week's key interest-rate decisions from both the Federal Reserve (Fed) and the Swiss National Bank (SNB).

On Monday, fresh data continued to highlight subdued inflation in Switzerland. Producer and Import prices declined by 0.7% YoY in May, marking a deeper drop than April's 0.5% fall and highlighting persistent disinflation pressures. 

On a monthly basis, prices slipped 0.5% in May, surprising markets by reversing the previous month's 0.1% uptick and adding to expectations that the SNB may opt for further policy easing this week.

Adding to the dovish narrative, the KOF Swiss Economic Institute revised its outlook for Switzerland's economic growth in 2026 on Monday, citing unpredictable US trade policies as a key headwind. The think tank now expects sport-adjusted GDP to expand by 1.5% in 2026, a 0.4 percentage point downgrade, while maintaining its 2025 growth projections unchanged at 1.4%. 

The KOF also sees a gradual rise in unemployment to a neutral 3% by the end of next year and forecasts a slower pace of job creation amid heightened policy uncertainty. Softer energy costs and the resilient Swiss Franc (CHF) have also prompted KOF to cut its inflation projections to 0.2% for 2025 and 0.5% for 2026.

In line with this cooling price trend, the institute expects the Swiss National Bank to lower rates by 25 basis points to 0% on Thursday and maintain that stance through the forecast horizon.

On the US side, traders will watch the New York Empire State Manufacturing Index later on Monday for fresh insight into factory activity, followed by the US Retail Sales report on Tuesday, which will help gauge the health of consumer spending. 

However, the main spotlight remains on this week's central bank decisions: the Federal Reserve is widely expected to hold rates steady on Wednesday, maintaining its cautious stance. Expectations surrounding the Fed decision, coupled with that from the SNB and geopolitical headlines emerging from the Middle East, will set the tone for the USD/CHF pair in the days ahead.