The USD/CHF currency pair has retreated from its recent gains, trading around 0.8840 during the Asian session on Thursday. The US Dollar (USD) is facing downward pressure after breaking its four-day winning streak, amid growing speculation that the Federal Reserve (Fed) will reduce interest rates in December. This comes after the latest US Consumer Price Index (CPI) report failed to offer strong enough evidence to prevent a rate cut.
According to the CME FedWatch Tool, there is now a nearly 99% probability of the Fed reducing rates by 25 basis points on December 18. As a result, traders are turning their attention to the US November Producer Price Index (PPI), set to be released later on Thursday, for further market direction.
The US CPI for November showed a slight increase to 2.7% year-over-year, up from 2.6% in October. The headline CPI posted a 0.3% month-on-month rise, in line with expectations. Excluding volatile food and energy prices, the core CPI climbed 3.3% YoY, while the monthly core CPI increase also matched forecasts at 0.3%.
Meanwhile, the Swiss Franc (CHF) has remained stable as investors anticipate a 25 basis point cut in Switzerland’s key policy rate later on Thursday by the Swiss National Bank (SNB). This would mark the fourth consecutive rate cut by the central bank, as inflation remains well within the SNB’s target range of 0-2%.
However, some economists expect the SNB to implement a more significant 50 basis point reduction in December, aimed at stimulating economic growth. Swiss consumer price inflation edged up to 0.7% in November, compared to 0.6% in October, but still fell short of the expected 0.8%. Additionally, Switzerland’s economic growth remains lackluster, with GDP expanding by only 0.4% in the third quarter, slower than the 0.6% growth in the second quarter.
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