The USD/CHF currency pair is trading relatively flat at around 0.8655 during the early European session on Thursday. Traders appear to be holding off on significant moves as they await crucial U.S. economic data later in the day. Meanwhile, the U.S. Dollar Index (DXY), which measures the value of the dollar against a basket of foreign currencies, is down 0.05% and stands at approximately 102.55.
US Economic Data and Fed Expectations
The latest U.S. Consumer Price Index (CPI) report suggests that inflation is moving towards the Federal Reserve’s 2% target. However, expectations for a substantial rate cut by the Fed have diminished. The CME FedWatch Tool now shows a 41% probability of a 50 basis points (bps) rate cut in September, down from 50% before the CPI data release.
Federal Reserve officials have expressed varied views on interest rates. Atlanta Fed President Raphael Bostic has called for more evidence before endorsing lower rates, while Chicago Fed President Austan Goolsbee has expressed growing concern about the labor market rather than inflation, citing recent improvements in price pressures coupled with weak employment data.
Upcoming Data and Fed Speeches
Investors are focused on upcoming U.S. Retail Sales and weekly Initial Jobless Claims reports for further guidance. Retail Sales are forecasted to increase by 0.3% month-over-month in July. Initial Jobless Claims for the week ending August 10 are expected to rise to 235,000 from 233,000 the previous week. Additionally, speeches from Fed officials Alberto Musalem and Patrick Harker later today will be closely monitored.
Swiss Franc and Geopolitical Tensions
On the Swiss front, escalating geopolitical tensions in the Middle East may bolster the Swiss Franc (CHF) as a safe-haven asset, potentially impacting the USD/CHF pair. Reports from Aljazeera indicate that Israeli military actions have intensified in the Gaza Strip, with recent strikes and artillery attacks contributing to a volatile situation. These geopolitical risks could influence the USD/CHF exchange rate in the near term.
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