The USD/CHF pair is trading around 0.8960 for the second day in a row on Friday, remaining in negative territory. Traders are increasing their bets on Fed rate cuts in September following a weaker-than-expected June US CPI inflation report. There is speculation that the SNB may also cut interest rates further, which could limit the pair’s downside.
The US Dollar weakened after US consumer prices unexpectedly fell in June, with the CPI dropping 0.1% MoM and the annual CPI rising 3% YoY, the lowest reading in a year. This has led to expectations of a Fed interest rate cut in the near future. The growing speculation of a rate cut has led to the US Dollar edging lower, with traders now seeing an 85% chance of easing in September.
On the Swiss front, geopolitical tensions, political uncertainty in the US and Europe, and concerns about the global economic slowdown may boost safe-haven assets like the Swiss Franc. However, the speculation that the Swiss National Bank (SNB) will cut interest rates further could put pressure on the CHF.
The Swiss Franc is considered a safe-haven asset, with its value influenced by factors such as market sentiment, the country’s economic health, and actions taken by the SNB. The SNB meets quarterly to decide on monetary policy, aiming for an annual inflation rate of less than 2%. Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the CHF’s valuation. Switzerland’s economy is closely linked to the Eurozone, with high dependency on the Eurozone economies.