The USD/CHF pair trades on a softer note near 0.8945 on Tuesday during the early European session. Despite a modest rebound in the Greenback, the pair edges lower. Attention later on Tuesday will be on the US Retail Sales release and a scheduled speech by Federal Reserve’s Adriana Kugler.
The pair’s decline is driven by rising expectations that the US Federal Reserve will cut interest rates sooner than previously anticipated, possibly this September. This speculation has exerted selling pressure on the Greenback. Traders are currently pricing in a 100% probability that the Fed funds rate will be reduced by at least 25 basis points during the Federal Open Market Committee (FOMC) meeting in September.
Fed Chair Jerome Powell stated on Monday that recent inflation data has bolstered confidence that price increases are returning to the target in a sustainable manner. He further indicated that the Fed does not plan to wait until inflation reaches 2% before taking action, suggesting that rate cuts may be imminent.
On the Swiss front, political uncertainty in the US and the recent second round of France’s parliamentary elections provide support to the safe-haven Swiss Franc (CHF). In a shocking event, Donald Trump was shot in the ear during a rally in Butler, Pennsylvania, in an assassination attempt. The attack resulted in one spectator being killed and two others critically injured, with Trump pictured with blood spilling from his ear, as reported by the BBC. Additionally, ongoing concerns about France’s budget have helped boost the CHF.
The combination of these factors continues to influence the USD/CHF pair, with market participants closely monitoring developments for further direction.
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