USD/CHF slides to one-month low as resilient US data fails to lift Greenback

• The Swiss Franc strengthens for a fourth straight day, sending USD/CHF toward fresh one-month lows.
• The US Dollar Index (DXY) slips below 98.00 as markets price in an 89% chance of a Fed rate cut in September.
• US July PCE report showed sticky inflation pressures alongside strong household spending.

The Swiss Franc (CHF) extends its rally for the fourth consecutive day on Friday, with USD/CHF slipping toward the 0.8000 psychological mark near fresh one-month lows, pressured by a broadly weaker US Dollar (USD) despite resilient US inflation and spending data.

At the time of writing, the USD/CHF pair is trading around 0.7997 in the American session, erasing earlier intraday gains. The US Dollar Index (DXY) failed to sustain a move above the 98.00 mark and is hovering near 97.76, with USD/CHF mirroring the Greenback's broader weakness.

The latest US data release confirmed sticky inflation pressures alongside robust household demand. The Bureau of Economic Analysis reported that the Core Personal Consumption Expenditures (PCE) Price Index rose 0.3% MoM in July, matching forecasts, while the annual rate edged up to 2.9% from 2.8%, the highest since February. Headline PCE increased 0.2% MoM, in line with expectations but slightly softer than June's 0.3%, with the yearly figure steady at 2.6%. Personal spending accelerated to 0.5% in July from 0.3% in June, while personal income grew 0.4% MoM.

Despite the stronger spending backdrop, markets focused on the policy outlook, with traders increasing bets on a September Federal Reserve (Fed) Interest rate cut. Fed funds futures now price an 89% probability of a 25 basis point reduction, reinforcing the Greenback's soft tone. Short-term Treasury yields retreated, while the longer end of the curve held firm, reflecting expectations of easier monetary policy without a material shift in long-term inflation risks.

Meanwhile, the Swiss Franc continues to benefit from its safe-haven appeal, underpinned by ongoing trade tensions and political uncertainty surrounding the Fed's independence. The uncertainty has deepened after Fed Governor Lisa Cook filed an emergency motion to block US President Donald Trump's attempt to remove her, with hearings now underway.

At Friday's session, the Fed made its own court filing while Trump argued that the court should defer to the President on defining "cause" for removal. The Department of Justice, meanwhile, signaled it would not oppose converting Cook's emergency motion into a preliminary injunction, making it less likely that a final ruling would be handed down immediately, according to Bloomberg.

Much of the debate has focused on the meaning of "for cause" under the Federal Reserve Act, which allows governors to be removed by the President only under that condition. Traditionally understood as malfeasance or misconduct, legal experts note that the definition could be stretched further, and reporters on the case suggested the issue may ultimately be decided by the Supreme Court.