During the early European trading hours on Thursday, the USD/CHF pair encountered selling pressure around the 0.9102 mark. This development comes as the Swiss Franc (CHF) gains momentum following the release of Switzerland’s Gross Domestic Product (GDP) report for the first quarter (Q1) of 2024, which exceeded expectations. Currently, the USD/CHF pair is trading 0.32% lower for the day, hitting weekly lows.
According to the State Secretariat for Economic Affairs (SECO), Switzerland’s economy sustained its growth momentum in Q1, with GDP expanding by 0.5% quarter-on-quarter (QoQ). This figure surpassed both earlier projections and the previous reading of 0.3% growth. On an annual basis, Q1 GDP reached 0.6% year-on-year (YoY), surpassing the market consensus of 0.5%. The positive GDP report has bolstered the CHF and weighed on the USD/CHF pair.
Furthermore, Switzerland’s trade surplus in April increased to $4,316 million from $3,767 million in March, as reported by the Federal Office for Customs and Border Security (FOCBS) on Thursday.
In addition to the domestic economic factors, escalating geopolitical tensions in the Middle East are fueling demand for safe-haven assets like the Swiss Franc. The recent announcement by Israel’s military regarding the control of the Philadelphi Corridor, a critical buffer zone along the Gaza-Egypt border, has heightened concerns, contributing to the CHF’s strength.
Meanwhile, on the USD front, hawkish remarks from Federal Reserve officials and better-than-expected US economic data have raised expectations of a delay in interest rate cuts by the US central bank this year. Fed Atlanta President Bostic expressed optimism about easing price pressures resulting from the COVID-19 pandemic in the coming year. However, he noted that the Fed still has work to do to address significant price growth witnessed in recent years.
Market sentiment suggests a 50% chance that the Fed will maintain interest rates in September, according to the CME FedWatch Tool. This wait-and-see approach from the Fed could provide some support to the Greenback and limit the downside for the USD/CHF pair. Investors will closely monitor the second estimate of US Gross Domestic Product (GDP) for Q1 2024, expected to show a 1.3% expansion, for further insights into the economic outlook.
