Zurich/New York – The USD/CHF pair extends its gains for a second consecutive day, trading around 0.9080 in early European hours on Friday. The Swiss Franc (CHF) weakened against the US Dollar (USD) following the release of disappointing Swiss industrial production data, while the Fed‘s continued hawkish stance on inflation bolsters the greenback.
Swiss Statistics reported a 3.1% decline in industrial production volume for the first quarter, marking the second consecutive quarter of contraction. This follows an upwardly revised decline of 0.5% in the previous quarter. On a seasonally adjusted quarterly basis, industrial production dropped 1% in Q1, compared to a revised 1.1% decline in the prior quarter. The weakened industrial activity adds to concerns about the Swiss economy’s health and weighs on the CHF.
Meanwhile, the US Dollar (USD) receives support from the Federal Reserve’s (Fed) continued cautious stance on inflation and the potential for rate cuts in 2024. Atlanta Fed President Raphael Bostic, in a speech on Thursday, emphasized the need for patience with interest rates, citing persistent pricing pressure in the US economy. Cleveland Fed President Loretta Mester echoed this sentiment, suggesting that it might take longer than anticipated to gauge the inflation trajectory and that the Fed should maintain its restrictive policy for an extended period.
However, the USD’s gains were tempered by Thursday’s release of higher-than-expected Initial Jobless Claims data. The number of Americans filing new claims for jobless benefits rose to 222,000 for the week ending May 10, exceeding the market consensus of 220,000, although below the previous week’s figure of 232,000. This data has fueled market expectations of a potential Fed rate cut in September.
Despite the mixed signals from the US economy, the Fed’s hawkish rhetoric and the slump in Swiss industrial production are currently driving the USD/CHF higher. The pair’s future direction will depend on upcoming economic releases from both Switzerland and the US, as well as any further pronouncements from Fed officials.
