The USD/CHF pair showed slight gains around 0.8840 during the early European session on Wednesday, recovering from recent three-month lows. The pair’s rebound, however, appeared capped as market sentiment increasingly priced in expectations of a Federal Reserve rate cut later this year. Notably, US markets remained closed on Wednesday in observance of Juneteenth National Independence Day.
Investor focus now turns to the upcoming Swiss National Bank (SNB) Interest Rate Decision scheduled for Thursday, with analysts widely anticipating no change to the current 1.5% rate. Despite elevated inflation in Switzerland for the second consecutive month in May, there remains speculation with approximately 60% probability, down from 97% in April, according to Bloomberg, that the SNB may still opt for a rate cut.
“We expect the policy rate to be cut by 25 basis points to 1.25% at this upcoming meeting,” remarked Nomura European economist George Moran, citing perceived restrictive policy despite inflation remaining within target ranges and expected to stay there.
On the other hand, recent US economic data, particularly the weaker-than-expected May Retail Sales report released by the Commerce Department on Tuesday, has bolstered market expectations of a future Fed rate cut. Retail Sales in the US rose by only 0.1% month-on-month in May, falling short of the anticipated 0.2% increase and following a 0.2% decline in April.
The disappointing Retail Sales figures have fueled speculation that the Federal Reserve could potentially implement interest rate cuts in the coming months, pressuring the US Dollar lower against its major counterparts.
As global markets navigate these developments, the USD/CHF pair continues to reflect investor sentiment surrounding central bank policies and economic data releases, with further volatility expected ahead of key monetary policy decisions.
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