The USD/CHF pair is attracting buyers around 0.8485 during the early European session on Friday, following a weakening of the Swiss Franc (CHF) after the Swiss National Bank (SNB) announced an interest rate cut on Thursday. Market participants are now awaiting the release of the US Personal Consumption Expenditures (PCE) Price Index data later today.
The SNB decided to lower interest rates by 25 basis points, bringing its policy rate to 1.00%, the lowest level since early 2023. Analysts at Goldman Sachs noted that this decision was influenced by declining inflationary pressures, driven in part by a stronger CHF. They anticipate an additional 25 basis point cut during the December meeting, based on the SNB’s dovish guidance and revised inflation projections.
Positive US economic data released on Thursday has provided some support for the US Dollar (USD) against the CHF. Notably, the US weekly Initial Jobless Claims for the week ending September 21 increased to 218,000, a rise from the previous week’s revised figure of 222,000, and below the market consensus of 225,000. Additionally, US Durable Goods Orders remained flat in August, contrasting with a substantial 9.9% rise in July, and outperforming expectations of a 2.6% decline.
However, dovish remarks from Federal Reserve (Fed) officials and increasing speculation about potential rate reductions in the coming months may limit the upside potential for the USD. Fed Governor Lisa Cook expressed her strong support for the central bank‘s decision to cut interest rates by 50 basis points, describing it as a crucial step toward fostering “moderate” economic growth.
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