During European trading hours on Friday, the USD/CHF pair retraced its recent losses, hovering around 0.9150. Traders redirected their attention to the US Dollar (USD) following the release of higher-than-expected Purchasing Managers Index (PMI) data from the United States, which tempered risk appetite. The robust data further reinforced the hawkish sentiment surrounding the Federal Reserve (Fed), signaling the potential maintenance of elevated policy rates.
The S&P Global US Composite PMI for May surged to 54.4, surpassing April’s 51.3 and market expectations of 51.1. This marked its highest level since April 2022. Notably, the Service PMI climbed to 54.8, reflecting the most significant output growth in a year, while the Manufacturing PMI rose to 50.9.
Moreover, Federal Reserve Bank of Atlanta President Raphael Bostic cautioned on Thursday that the inflation outlook might not improve as swiftly as anticipated by market participants. According to the CME FedWatch Tool, the probability of the Federal Reserve implementing a 25 basis-point rate cut in September decreased to 46.6% from 49.4% a day earlier.
In Switzerland, the Employment Level (QoQ) data released by the Swiss Statistics indicated a slight dip, with the total number of employed workers standing at 5.484 million in the first quarter, compared to the previous reading of 5.488 million.
The yield on the 10-year Swiss government bond remained around 0.76%, implying that the Swiss National Bank (SNB) is likely to maintain current interest rates. Such a stance could potentially bolster the Swiss Franc (CHF) and weigh on the USD/CHF pair.
Investors have been closely monitoring signals regarding the timing of potential interest rate adjustments by the Fed. Meanwhile, the Swiss National Bank surprised markets by lowering interest rates for the first time in nine years in March, reducing the key interest rate by 25 basis points to 1.50%. This decision marked the first major central bank to ease its monetary policy in response to prevailing economic conditions.
