The USD/CHF pair has recovered recent losses, trading around 0.9030 during early European hours on Thursday. The Swiss Franc (CHF) has weakened due to a slowdown in Swiss inflation, while the US Dollar (USD) faces pressure from softer US economic data.
Swiss Inflation Data
The Swiss Consumer Price Index (CPI) for June fell to 1.3% year-over-year, down from May’s four-month high and below market expectations of 1.4%. On a monthly basis, the CPI remained unchanged in June after a 0.3% rise in May. The core CPI, excluding volatile items like unprocessed food and energy, decreased to 1.1% year-on-year in June from 1.2% in May.
US Economic Indicators
In the United States, weaker-than-expected economic data has fueled speculation that the Federal Reserve may reduce interest rates in 2024. The US ISM Services PMI dropped sharply to 48.8 in June, marking the steepest decline since April 2020 and falling significantly below market expectations of 52.5. This follows a reading of 53.8 in May. Additionally, the ADP Employment report indicated that US private businesses added 150,000 workers in June, the lowest increase in five months and below the expected 160,000 and the revised 157,000 in May.
Federal Reserve Comments
Federal Reserve Bank of Chicago President Austan Goolsbee remarked on BBC Radio that returning inflation to 2% will take time and that further economic data are required. Conversely, Fed Chair Jerome Powell stated on Tuesday that the central bank is resuming its disinflationary trajectory.
US Dollar Performance
The US Dollar Index (DXY), which measures the USD against six major currencies, is under pressure due to lower US Treasury yields, trading around 105.30 at the time of writing. On Wednesday, yields on 2-year and 10-year US Treasury bonds were at 4.70% and 4.35%, respectively. US markets will be closed on Thursday in observance of the Independence Day holiday.
Conclusion
The USD/CHF pair’s recovery reflects the interplay between weakening Swiss inflation and disappointing US economic data. As market participants digest these developments, the future direction of the pair will likely be influenced by upcoming economic indicators and central bank policies on both sides of the Atlantic.
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