During the early European session on Thursday, the USD/CHF pair experienced a slight decline to 0.8920. This movement was primarily attributed to a weaker US Dollar (USD), fueled by increasing speculation that the Federal Reserve (Fed) might initiate interest rate cuts starting from the September meeting, creating a headwind for the pair.
The sentiment was influenced by recent economic indicators, including the US Personal Consumption Expenditures (PCE) Price Index data released last week and the weaker Manufacturing PMI report earlier this week. These factors have revived hopes among investors that the Fed could implement interest rate cuts this year, consequently exerting selling pressure on the USD across the board. According to the CME FedWatch tool, financial markets have priced in approximately a 70% possibility of Fed rate cuts in September, up from 54.9% at the beginning of the week.
Investor focus now shifts to the upcoming release of US May employment data on Friday, which includes key indicators such as the US Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings. Market expectations suggest that the NFP figure could see 185,000 job additions in May, while the Unemployment Rate is projected to remain stable at 3.9% for the same period. A softer employment market data could further solidify expectations of monetary policy easing by the Fed.
On the Swiss front, recent data from the State Secretariat for Economic Affairs (SECO) revealed that the unemployment rate in Switzerland stood at 2.3% in May, unchanged from April and in line with estimations. Additionally, a report on Tuesday indicated that Switzerland’s monthly Consumer Price Index (CPI) inflation rose by 0.3% MoM in May, falling short of the market consensus of 0.4%. This cooler inflation data has prompted expectations of rate cuts by the Swiss National Bank (SNB) on June 28, potentially weighing on the Swiss Franc (CHF) in the near term.
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