Swiss Franc strengthens as mixed US CPI, Trump's Powell threat weigh on Dollar

• USD/CHF drifts lower as mixed US CPI data reinforces expectations of a Fed rate cut in September.
• US July CPI rose 0.2% MoM, matching forecasts, while the annual rate held at 2.7%, slightly below expectations of 2.8%. Core CPI climbed 0.3% MoM and 3.1% YoY, both above estimates.
• US President Donald Trump escalates political pressure on the Fed, saying he may allow a major lawsuit against Chair Jerome Powell over "grossly incompetent" management of the Fed building construction.

The Swiss Franc (CHF) strengthens against the US Dollar (USD) on Tuesday, with USD/CHF drifting lower as mixed US inflation data reinforced expectations of a Federal Reserve (Fed) rate cut in September. Sentiment toward the Greenback was further dented after US President Donald Trump threatened to pursue legal action against Fed Chair Jerome Powell, escalating political pressure on the central bank.

At the time of writing, USD/CHF is trading near 0.8080, down around 0.50% on the day, while the US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is hovering near a two-week low around 98.10.

US CPI points to cooling inflation

Data from the US Bureau of Labor Statistics showed the headline Consumer Price Index (CPI) rose 0.2% MoM in July, matching market expectations and easing from June's 0.3% increase. On an annual basis, headline inflation held steady at 2.7%, slightly below the 2.8% forecast.
Core CPI, which excludes volatile food and energy prices, rose 0.3% MoM and 3.1% YoY, both above consensus estimates. While the firmer core reading tempered the dovish outlook slightly, markets largely focused on the soft headline data and the broader disinflation trend.

Following the release, the CME FedWatch Tool indicated a 94% probability of a 25 basis point rate cut in September, up from 84% before the data.

Speaking on Tuesday, Federal Reserve Governor Schmid said he supports a "patient approach" to changing the Fed's policy rate, noting that retaining a "modestly restrictive" stance is appropriate for the time being. Schmid added that tariffs appear to be having a limited effect on inflation -- a reason, he argued, to keep policy on hold rather than an opportunity to cut rates. He said growth remains solid, inflation is still too high, and that policy is "modestly restrictive and not very restrictive." Schmid also noted he would be willing to modify his views if signs of weakening demand emerge.

Trump turns up the heat on Powell

In a Truth Social post, President Trump said:

"I am considering allowing a major lawsuit against Powell to proceed because of the horrible, and grossly incompetent, job he has done in managing the construction of the Fed Buildings. I would sue Powell over construction of Fed buildings."

The Franc also drew some relief from clarity on the Gold tariff saga after President Trump confirmed that Gold imports from Switzerland to the United States will not face tariffs, reversing earlier guidance that had threatened a 39% levy on Gold bars. The reversal eased immediate concerns in the Swiss bullion trade, although the industry continues to await formal, binding confirmation to fully restore certainty.