USD/CHF has broken its six-day losing streak and is currently trading around 0.8590 during the Asian session on Wednesday. The upward movement is due to the improved US Dollar (USD) performance, driven by rising Treasury yields. The US Dollar Index (DXY) has extended its gains for the second consecutive day, reaching 103.30, with 2-year and 10-year yields on US Treasury bonds at 4.02% and 3.91%, respectively.
However, concerns about a potential 50-basis point Fed rate cut in September following weaker US employment data in July could limit the USD/CHF pair’s upside. The CME FedWatch tool now indicates a 67.5% probability of a 50-basis point interest rate cut by the US Federal Reserve in September.
Switzerland’s Real Retail Sales unexpectedly dropped by 2.2% year-on-year in June, while the Swiss Unemployment Rate remained steady at 2.3% on a non-seasonally adjusted basis in July. Traders are awaiting the Swiss National Bank’s Foreign Currency Reserves data to gain insights into the central bank’s interventions in the currency market.
Analysis:
The USD/CHF pair is currently on the rise as the US Dollar strengthens against the Swiss Franc amid higher Treasury yields. However, the possibility of a 50-basis point rate cut by the US Federal Reserve in September could limit the pair’s upward potential. In Switzerland, weak retail sales data and a steady unemployment rate are contributing to the market sentiment. Traders are closely monitoring the SNB’s Foreign Currency Reserves data to understand the central bank’s actions in influencing the exchange rate of the Swiss Franc.