The USD/CHF currency pair has paused its three-day winning streak, trading around 0.8890 during the Asian session on Tuesday. The U.S. Dollar (USD) is under pressure as market expectations grow for a potential Federal Reserve (Fed) rate cut in September. Fed Chair Jerome Powell’s recent comments suggest that inflation in the U.S. is progressing towards the Fed’s target, indicating possible upcoming interest rate reductions.
Powell highlighted that the three inflation readings this year provide some confidence that inflation is on track to meet the Fed’s target sustainably. This implication of approaching interest rate cuts has influenced market sentiment. Supporting this outlook, Federal Reserve Bank of New York President John Williams noted on Friday that the pre-pandemic long-term trends leading to lower neutral interest rates remain in effect. Williams mentioned, “My own Holston-Laubach-Williams estimates for r-star in the United States, Canada, and the Euro area are about the same level as they were before the pandemic,” as reported by Bloomberg.
Political Developments in the U.S.
On Monday, Democrats showed strong support for Vice President Kamala Harris as the leading candidate for the presidential nomination. According to NBC News, Harris has secured endorsements from a majority of the Democratic party’s pledged convention delegates. With the threshold for securing the nomination set at 1,976 delegates, NBC estimates that Harris has received support from 1,992 delegates through spoken or written endorsements.
Swiss Franc Outlook
On the Swiss front, traders are anticipating that the Swiss National Bank (SNB) may reduce interest rates further in September, potentially exerting downward pressure on the Swiss Franc (CHF). This expectation is driven by subdued inflationary pressures and the strength of the CHF. Kyle Chapman, an FX markets analyst at Ballinger Group, commented, “I expect the SNB to implement a third rate cut next quarter, with a potential fourth cut in December if there remains strong confidence in the need for restrictive monetary policy.”
As the market navigates these economic and political developments, the USD/CHF pair remains a focal point for traders assessing the future moves of both the Fed and the SNB.
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