The USD/CHF currency pair edged lower to approximately 0.8480 during European trading hours on Tuesday. This decline is attributed to the US Dollar (USD) moderating its intraday gains, likely influenced by improved global risk sentiment. Nevertheless, stronger US Treasury yields are providing support, curbing further declines in the Greenback.
The US Dollar Index (DXY), which gauges the USD against six major currencies, has maintained minor gains for a third consecutive day, trading around 101.70. Concurrently, yields on US Treasury bonds are at 3.69% for 2-year bonds and 3.72% for 10-year bonds.
Support for the USD has been bolstered by recent US labor market data, which has injected uncertainty into expectations for a significant interest rate cut by the Federal Reserve (Fed) at its upcoming September meeting. Market forecasts, as indicated by the CME FedWatch Tool, fully anticipate at least a 25 basis point (bps) rate cut by the Fed. However, the probability of a more substantial 50 bps cut has slightly decreased to 29.0%, down from 30.0% the previous week.
In Switzerland, traders are keeping a close watch on any speeches from Swiss National Bank (SNB) officials this week, as no major economic data releases are on the horizon. Recent figures show Swiss inflation has dropped to a five-month low, heightening speculation about a potential rate cut by the SNB in the near future.
Additionally, the SNB’s Foreign Currency Reserves fell to CHF 694 billion in August, down from CHF 704 billion in July. This marks the fourth consecutive monthly decline, indicating ongoing intervention by the SNB in the currency markets to support the Swiss Franc (CHF).
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