- The USD/CHF pair fell slightly to 0.8905 at the start of Wednesday’s European session.
- Financial markets are expecting two, and potentially three, interest rate cuts this year, with the first cut coming in September.
- Expectations of an interest rate cut by the SNB may weigh on the CHF.
The USD/CHF pair is trading weaker near 0.8905 during the early European session on Wednesday. The pair’s weakness is supported by the prospect of interest rate cuts by the US Federal Reserve (Fed) this year, which are dragging the dollar lower across the board. Traders are waiting for the preliminary July S&P Global Purchasing Managers Index (PMI) US for fresh impetus.
Growing bets that the Fed will start easing monetary policy in September appear to be limiting the Greenback’s gains. Markets are expecting two or potentially three rate cuts this year. Traders have priced in a nearly 96% chance that the Fed will cut interest rates in September this year, according to the CME FedWatch tool.
However, these odds could change with key US economic data later this week. Investors are expecting an improvement in the US manufacturing sector, and a stronger-than-expected US PMI could limit the decline in the USD/CHF pair. US gross domestic product (GDP) for the second quarter is due on Thursday, while personal consumption expenditure (PCE) price index data for June will be released on Friday.
Data released Tuesday from the U.S. Register showed that existing home sales fell 5.4% month over month in June from 4.11 million to 3.89 million, below market consensus. Meanwhile, the Richmond Fed Manufacturing Index was -17 in July, down from -10 earlier.
Expectations that the Swiss National Bank (SNB) could further cut interest rates in September have weighed on the Swiss franc (CHF) in previous sessions. Ballinger Group currency analyst Kyle Chapman said the SNB is likely to cut rates by a third next quarter and potentially decide on a fourth cut in December. In addition, political uncertainty in the United States is contributing to volatility in the US dollar (USD) and supporting safe-haven assets such as the CHF.
