Recently, the USD/CHF pair has been trading near 0.8970, with the US Dollar showing signs of strength. This strength in the USD can be attributed to the diminishing Fed rate-cut expectations for the September meeting. The US Nonfarm Payrolls report for May indicated a robust labor demand and stronger-than-expected wage growth, leading to a shift in market sentiment towards risk aversion.
It is expected that the Federal Reserve will maintain a hawkish narrative on interest rate guidance due to slower progress in disinflation. With the labor market conditions appearing strong, the Fed is likely to keep interest rates at their current levels. This has led to a decline in Fed rate-cut bets, further boosting the appeal of the US Dollar.
Investors are closely monitoring the upcoming US Consumer Price Index (CPI) data for May and the Fed’s interest rate policy announcement. Annual core inflation is projected to have decelerated slightly, with headline figures showing steady growth. The Fed is anticipated to maintain the status quo for the seventh consecutive time. Investors will pay attention to the Fed’s guidance on interest rates, which is expected to be hawkish given the slower progress in disinflation.
On the Swiss front, the Swiss National Bank (SNB) is less likely to continue its rate-cut spell on June 20. Despite inflation remaining below the 2% threshold, SNB Chairman Thomas J. Jordan has highlighted small upside risks to inflation expectations. The weak Swiss Franc has made Swiss exports competitive in the global market, prompting caution from the SNB regarding interest rate decisions.
The USD/CHF pair is influenced by a combination of factors including shifting Fed rate-cut expectations, US economic data, and market sentiment. As investors await key economic indicators and central bank decisions, the currency pair is likely to experience heightened volatility in the coming days. Traders should remain vigilant and adapt their strategies accordingly to navigate the ever-changing market environment.