The USD/CHF pair has regained its recent losses, trading around 0.9000 during the European hours on Friday. This recovery can be attributed to a stronger US Dollar (USD), buoyed by growing expectations that the US Federal Reserve (Fed) will implement fewer rate cuts in 2025.
In its December meeting, the Fed reduced interest rates by a quarter point and revised its 2025 forecast to include only two rate cuts, down from the previously anticipated four. However, expectations for further rate cuts next year have been tempered by moderate US Personal Consumption Expenditures (PCE) inflation data.
The US Dollar Index (DXY), which tracks the value of the USD against six major peers, remains above 108.00, slightly below its highest level since November 2022. However, the upside potential for the Greenback could be limited, as US Treasury bond yields remain subdued, with the 2-year and 10-year yields at 4.33% and 4.58%, respectively.
The Swiss Franc (CHF) strengthened briefly against the USD following stronger-than-expected Swiss GDP data, which revealed an acceleration in economic growth in Q3 on a year-over-year basis. Nonetheless, remarks from Swiss National Bank President Martin Schlegel suggesting the potential for interest rates to dip below zero have kept market sentiment cautious, contributing to headwinds for the USD/CHF pair.
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