The USD/CHF pair has paused its five-day winning streak, trading around 0.8900 during Friday’s Asian session after retreating from a four-month high of 0.8917 reached on Thursday. This pullback comes amid a slight downward correction in the US Dollar (USD), following remarks from Federal Reserve (Fed) Chair Jerome Powell.
Powell highlighted the “remarkably good” performance of the US economy, which he said gives the Fed the flexibility to gradually lower interest rates. However, Richmond Fed President Thomas Barkin noted that while the central bank has made significant progress, there is still work to be done to maintain economic momentum.
In economic data, the US Producer Price Index (PPI) for October rose by 2.4% year-over-year, surpassing market expectations and up from the revised 1.9% increase in September. Core PPI, which excludes food and energy, rose 3.1%, slightly above the forecasted 3.0%.
While the USD/CHF pair faces some downside pressure, its decline may be limited due to expectations of further Swiss Franc (CHF) weakness. The Swiss National Bank (SNB) is under growing pressure to cut interest rates following a drop in Switzerland’s inflation rate to 0.6% in October, its lowest level in over three years. This low inflation reading suggests that price pressures are well-controlled, increasing the likelihood of an interest rate cut by the SNB in December.
SNB Vice Chairman Antoine Martin recently stated that the central bank is not committed to additional rate cuts in December, despite earlier indications that further reductions, potentially even a return to negative rates, could be considered. At its September meeting, the SNB signaled that it stood ready to act further if needed to manage inflation, with both Chairman Martin Schlegel and Vice Chairman Antoine Martin acknowledging the possibility of additional cuts.
As the USD/CHF pair consolidates, market participants are likely to continue weighing the divergent monetary policy outlooks of the Fed and the SNB. While US Dollar strength remains supported by strong economic performance, the potential for Swiss rate cuts could limit the upside for the Swiss Franc, keeping the pair within a tight range for now.
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