The USD/CHF pair continued its downward trajectory for the fourth consecutive trading day on Monday, remaining below the crucial 0.9000 mark. This decline in the Swiss Franc asset is driven by growing speculation that the Federal Reserve (Fed) might pivot towards policy normalization starting from the September meeting, casting a shadow over the US Dollar‘s (USD) outlook.
The US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, found temporary support near a three-week low at around 104.85. Meanwhile, 10-year US Treasury yields edged up to 4.3%, although they remain close to their weekly low.
Expectations of the Fed reducing interest rates sooner than previously anticipated have negatively impacted the US Dollar and bond yields. According to the latest dot plot, Fed officials indicated only one rate cut this year, with further reductions forecasted for the last quarter. The possibility of the Fed lowering rates from September has gained traction due to moderating strength in the US labor market, as highlighted by the Nonfarm Payrolls (NFP) report for June. The report showed an increase in the Unemployment Rate to 4.1% and a deceleration in annual Average Hourly Earnings to 3.9%. Although payrolls data exceeded estimates, they were still below May’s figures.
This week, investors will closely monitor the US inflation data for June, scheduled for release on Thursday, which could further influence Fed policy expectations.
On the Swiss Franc front, easing inflationary pressures could lead the Swiss National Bank (SNB) to continue reducing interest rates. The annual Swiss Consumer Price Index (CPI) decelerated to 1.3% in June, contrary to economists’ expectations of a steady growth rate of 1.4%.
As market participants anticipate crucial economic data releases, the USD/CHF pair’s movement will likely be influenced by ongoing Fed policy speculation and the SNB’s response to evolving inflation dynamics.
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