The USD/CHF pair saw slight declines around 0.8995, halting a three-day rally during the early European session on Thursday. The retreat follows heightened expectations of Federal Reserve rate cuts, spurred by Chair Jerome Powell’s recent remarks indicating a growing case for easing monetary policy.
Powell’s testimony before Congress underscored a potential shift towards rate cuts as inflation data showed incremental progress. The upcoming US Consumer Price Index (CPI) report for June, expected to reflect a 3.1% year-on-year increase, looms large as traders gauge its impact on Fed policy decisions.
Market sentiment favors a September rate cut, with less than a 10% probability of a July cut according to the CME FedWatch Tool. Meanwhile, speculation mounts around further cuts by the Swiss National Bank, potentially dampening the CHF’s outlook amidst global economic uncertainties.
Kyle Chapman, FX markets analyst at Ballinger Group, anticipates additional SNB rate reductions in the next quarter, with a cautious outlook potentially hindering the franc’s recovery against external pressures.
Political instability in Europe and safe-haven demand could also influence the CHF’s trajectory amid evolving global economic dynamics.
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