During Wednesday’s Asian session, USD/CHF showed signs of recovery, breaking a six-day losing streak to trade around 0.8590. The upturn in the pair is primarily attributed to a stronger US Dollar (USD), supported by increasing Treasury yields. The US Dollar Index (DXY) continued its upward trend for the second consecutive day, reaching 103.30. Notably, the yields on 2-year and 10-year US Treasury bonds stood at 4.02% and 3.91% respectively, at the time of reporting.
However, concerns over a potential US recession have tempered the gains. Weaker-than-expected US employment data for July has heightened expectations of a more aggressive rate cut by the US Federal Reserve (Fed) starting in September. According to the CME FedWatch tool, the probability of a 50-basis point interest rate cut in September surged to 67.5%, up significantly from 13.2% a week earlier.
Federal Reserve Bank of San Francisco President Mary Daly acknowledged the evolving risks to the Fed’s mandates, signaling openness towards rate cuts in upcoming meetings. Similarly, Chicago Fed President Austan Goolsbee emphasized the central bank‘s readiness to act in response to deteriorating economic or financial conditions.
Meanwhile, in Switzerland, recent economic data has shown mixed signals. Real Retail Sales unexpectedly contracted by 2.2% year-on-year in June, marking the second consecutive monthly decline and the sharpest drop since September 2023. Additionally, the Swiss Unemployment Rate remained stable at 2.3% on a non-seasonally adjusted basis in July, with a slight uptick to 2.5% on a seasonally adjusted basis.
Market participants are now focusing on the upcoming release of Foreign Currency Reserves data by the Swiss National Bank (SNB). This report will provide insights into the SNB’s efforts to influence the Swiss Franc‘s exchange rate through its activities in the currency markets.
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