The USD/CHF pair remains under selling pressure, hovering near 0.8405 during early European trading hours on Thursday. The US Dollar (USD) continues to be weighed down by dovish signals from Federal Reserve (Fed) officials, suggesting an imminent shift in monetary policy.
Fed Chair Jerome Powell, speaking at the annual Jackson Hole retreat last week, indicated that “the time has come” for the US central bank to consider cutting interest rates. This has heightened market expectations, with the CME FedWatch Tool showing a full pricing in of a 25 basis points (bps) rate cut in September. Additionally, there is a 36.5% probability of an even deeper cut.
Echoing Powell’s sentiments, San Francisco Fed President Mary Daly stated on Monday that “the direction of change is down, and the time to adjust is now.” Traders are widely anticipating a rate cut in September, which is expected to further weaken the Greenback in the short term. Minneapolis Fed President Neel Kashkari also highlighted the possibility of rate cuts as early as September, citing concerns over a weakening labor market.
On the geopolitical front, rising tensions in the Middle East and global economic uncertainties are bolstering demand for safe-haven currencies like the Swiss Franc (CHF), further pressuring the USD. In a significant escalation, Israel launched raids and airstrikes across the occupied West Bank on Wednesday, resulting in the deaths of at least 11 Palestinians, as reported by CNN. This military action, described by Israel as its most extensive in years, has added to global instability.
Meanwhile, recent data from the Centre for European Economic Research showed a decline in Switzerland’s ZEW Survey Expectations, which fell to -3.4% in August from 9.4% in the previous month. Looking ahead, the Swiss KOF Leading Indicator for August is set to be released on Friday. In the US, the second estimate of Q2 GDP, scheduled for Thursday, is projected to show an annualized growth rate of 2.8%.
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