The USD/CHF pair has surged to near the key level of 0.9000 despite soft US core PCE inflation data for May weighing on the US Dollar’s appeal. The Swiss Franc has strengthened as the US Dollar faces a significant downturn following the release of the US core Personal Consumption Expenditure Price Index (PCE) data for May, which has raised expectations of potential rate cuts by the Federal Reserve (Fed).
The latest US PCE report showed a decline in price pressures, with the annual core PCE price index dropping to 2.6% from the previous 2.8%. The CME FedWatch tool predicts two rate cuts this year, with the normalization process expected to begin at the September meeting.
However, Fed officials have a more cautious outlook, anticipating only one rate cut this year and emphasizing the need for sustained decline in inflation before considering any interest rate adjustments. San Francisco Fed Bank President Mary Daly highlighted the importance of additional positive data to build confidence in inflation returning to the target of 2%.
Investors are now awaiting the US ISM Manufacturing PMI data for June to gauge the health of factory activities. While the Manufacturing PMI is expected to show improvement, it is likely to remain below the 50.0 threshold that distinguishes expansion from contraction.
On the Swiss Franc front, market participants are eagerly anticipating the Swiss Consumer Price Index (CPI) data for June, set to be released on Thursday. This data will provide insights into whether the Swiss National Bank (SNB) will continue its rate-cutting cycle at the upcoming September meeting. The SNB initiated rate cuts in March and followed up with additional cuts in the June meeting.
Overall, the USD/CHF pair has seen a rise to 0.9000 despite challenges faced by the US Dollar, with investors closely monitoring economic indicators and central bank actions for further market cues.