The USD/CHF currency pair softened to approximately 0.8750 during the early European trading session on Thursday, as traders await the outcome of the US Federal Reserve’s interest rate decision later in the day.
Market sentiment remains cautious ahead of the Federal Reserve’s anticipated move, with a 25 basis point rate cut expected. According to the CME FedWatch tool, there is a nearly 98% chance of this reduction, with nearly 70% odds of a similar move in December. Despite potential downward pressure on the US Dollar (USD), analysts expect that any downside could be limited by the expectation that a potential Donald Trump presidency may fuel inflation and slow the pace of interest rate cuts.
In Switzerland, the seasonally adjusted unemployment rate held steady at 2.6% in October, according to data from the State Secretariat for Economic Affairs (SECO). Meanwhile, Swiss National Bank (SNB) Chairman Martin Schlegel suggested last week that further interest rate cuts could be implemented to maintain price stability in the mid-term. Market expectations currently reflect a 72% probability of a 25 basis point cut in December, with a 28% chance of a deeper 50 basis point reduction.
The Swiss Franc (CHF) may also benefit from ongoing geopolitical risks, particularly with tensions in the Middle East. Fears of escalating conflict, including potential military actions by Israel against Iran, could boost demand for safe-haven assets, supporting the Swiss Franc’s value.
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