Seven-week highs: Swiss Franc advances as inflation growth exceeds forecasts

• More than 1% lost in two days. USD/CHF slips to session highs just below 0.8150.
• 1.5% annual Swiss CPI inflation in October marks the fastest pace in more than two years.
• US midterm voting keeps the Greenback under pressure.

USD/CHF has reached a fresh seven-week low of 0.8149. The pair has lost more than 1% so far this week as the Swiss Franc (CHF) advances for a second consecutive day on Tuesday. Stronger-than-expected Swiss Consumer Price Index (CPI) figures are supporting the Franc, while the US Dollar (USD) stays under pressure as Americans vote in the midterm elections.

October consumer inflation accelerated to 0.2%, rather than the flat reading markets had expected, according to Tuesday’s release from the Swiss Federal Statistics Office. The annual rate climbed from September’s 1% to 1.5%, exceeding the 1.3% market consensus and reaching its fastest pace in more than two years.

1.5% consumer inflation could bring SNB rate hikes into consideration sooner

Inflation remains too moderate to warrant immediate monetary tightening by the Swiss National Bank (SNB). Nevertheless, the figures confirm that energy costs are driving prices higher. Given the tangled conflict in the Middle East, that trend appears likely to persist. If it does, the SNB might have to put monetary tightening back under consideration, at a minimum.

Uncertainty over the midterm elections, meanwhile, continues to weigh on the US Dollar. ING strategists say they “don’t expect today’s US midterm results to cause structural shifts in FX.” 

Markets have already factored in a moderate Republican defeat, according to ING. The bank warns, however, that Democratic control of both the House and the Senate could put further pressure on the Dollar. In a note, ING says: “Fears of tougher regulation could weigh on AI stocks (we’ve recently seen how that can hit the greenback), while markets could price in greater risks of decision-making gridlock around issues such as government funding and the debt ceiling,”