In the early European session on Wednesday, the USD/CHF pair is trading lower near 0.8905. This decline is driven by market expectations of multiple rate cuts by the US Federal Reserve this year, starting as early as September. The potential rate cuts are putting pressure on the Greenback against other currencies. Traders are now focusing on the preliminary US July S&P Global Purchasing Managers Index (PMI) for further direction.
The likelihood of the Fed easing its monetary policy in September is limiting the upside potential for the US Dollar. Market participants are anticipating two or even three rate cuts in 2019. According to the CME FedWatch Tool, there is a nearly 96% probability of a rate cut in September.
However, these expectations could change based on upcoming US economic data releases. The performance of the US manufacturing sector and the US Gross Domestic Product (GDP) for the second quarter will be closely watched. A stronger-than-expected US PMI could provide support for the USD/CHF pair.
On the other hand, the Swiss Franc (CHF) has been under pressure due to speculations that the Swiss National Bank (SNB) might reduce interest rates in September. Analysts suggest that the SNB could announce further rate cuts later in the year, leading to increased volatility in the USD/CHF pair. Political uncertainties in the US are also contributing to the demand for safe-haven assets like the CHF.
Analysis:
The USD/CHF pair is currently trading lower at 0.8905 due to expectations of Fed rate cuts and SNB interest rate reductions. The outcome of key US economic data releases will play a crucial role in determining the future direction of the pair. Traders should monitor the US PMI, GDP, and PCE data for potential trading opportunities. Additionally, the correlation between the USD and CHF is likely to remain high, influenced by central bank policies and global economic conditions.