The USD/CHF pair has shown remarkable stability in the face of the looming Federal Reserve policy decision. Traders are cautiously navigating the thin trading environment, with the pair hovering around 0.8950 during early European hours. This calmness can be attributed to investors adopting a wait-and-see approach as they anticipate the Fed’s interest rate decision on Wednesday.
The US Dollar has maintained its strength in the market, supported by expectations of the Fed keeping rates steady in the range of 5.25%-5.50%. The central bank’s focus on curbing inflation towards its 2% target has also contributed to the Dollar’s buoyancy. Moreover, the upcoming release of US CPI figures for May, with estimated year-over-year increases of 3.4% and 3.5% for headline and core CPI respectively, is keeping traders on their toes.
The robust US jobs data for May has further solidified the Dollar’s position, reducing the likelihood of two Fed rate cuts in 2024. The positive labor market indicators have led to a decrease in the probability of a Fed rate cut in September, according to the CME FedWatch Tool. The odds have dropped to nearly 49.0%, down from 59.5% a week earlier, indicating growing confidence in the US economy.
On the other side, the Swiss National Bank (SNB) is expected to keep interest rates unchanged in June. Despite inflation levels remaining below the 2% threshold, SNB Chairman Thomas J. Jordan has warned of minor upside risks to inflation expectations. The SNB’s upcoming Financial Stability Report will shed light on the banking sector’s stability and the financial market infrastructure, providing valuable insights for traders.
The USD/CHF pair is displaying resilience and stability ahead of the Fed policy decision. While the US Dollar remains strong, investors are closely monitoring key economic indicators and central bank actions. The market sentiment is cautiously optimistic, with traders awaiting further guidance from the Fed and the SNB. As volatility is expected to increase post the Fed’s decision, traders need to stay alert and adapt their strategies accordingly to navigate the evolving market dynamics.