The USD/CHF pair has rebounded recently, trading around 0.9030 in early European trading on Thursday. This recovery is attributed to lower-than-expected Swiss inflation data. The Swiss Consumer Price Index (CPI) for June dropped to 1.3% year-on-year, falling from a four-month high in May and below the market forecast of 1.4%.
The US Dollar (USD) is facing challenges due to weaker economic data from the United States, fueling speculation that the Federal Reserve (Fed) may cut interest rates in 2024. Reports show that the US ISM Services PMI plummeted to 48.8 in June, the sharpest decline since April 2020, well below expectations. Additionally, the ADP Employment report revealed that private businesses in the US added only 150,000 jobs in June, the lowest increase in five months.
Federal Reserve Bank of Chicago President Austan Goolsbee mentioned that achieving the 2% inflation target will take time and more economic data are necessary. However, Fed Chair Jerome Powell indicated that the central bank is working towards controlling inflation.
The US Dollar Index (DXY), which measures the USD against major currencies, is under pressure due to lower US Treasury yields. As of now, the DXY is trading around 105.30. US markets will be closed on Thursday for Independence Day.
Inflation FAQs:
– Inflation measures the increase in the price of goods and services over time.
– Core inflation excludes volatile elements like food and fuel.
– Higher inflation usually results in a stronger currency.
– Central banks raise interest rates to combat high inflation.
– Gold is no longer the preferred asset during high inflation due to increasing interest rates.