The USD/CHF pair is making steady gains, approaching the 0.8700 mark in today’s European session. The Swiss Franc, known for its safe-haven appeal, is losing its shine as fears of a US recession subside.
Positive economic indicators, such as the upbeat weekly Initial Jobless Claims and better-than-expected Nonfarm Payrolls (NFP) data for July, have helped ease concerns about a recession in the US. This has led to a more optimistic market sentiment, with investors now shifting their focus to the upcoming US Consumer Price Index (CPI) data for July.
The US Dollar Index (DXY) is also showing strength, edging higher to around 103.25 against a basket of major currencies. The CPI report is expected to show a slight deceleration in both annual headline and core inflation rates, with monthly figures expected to rise by 0.2%.
This inflation data will be crucial in determining the Federal Reserve’s (Fed) next move on interest rates. Currently, financial markets are divided on the size of the potential interest-rate cut in September, with a 49.5% likelihood of a 50 basis point reduction according to the CME FedWatch tool.
Before the CPI data is released, investors will be keeping a close eye on the Producer Price Index (PPI) report for July, which is set to be published at 12:30 GMT. Both annual headline and core PPI rates are expected to have decelerated slightly.
Analysis:
The diminishing safe-haven appeal of the Swiss Franc and the positive economic indicators from the US have contributed to the rise of the USD/CHF pair. With the upcoming CPI and PPI data releases, investors will have more insight into the future monetary policy decisions of the Fed. This could potentially impact currency markets and investment strategies moving forward.