In the early European session on Monday, the USD/CHF pair demonstrated modest gains, hovering below the psychological barrier of 0.8800. The driving force behind this movement is the anticipation that the Federal Reserve (Fed) might implement an interest rate cut later in the year, leading to selling pressure on the US Dollar (USD) and presenting a challenging environment for the currency pair. Investors are closely eyeing the upcoming US Consumer Price Index (CPI) inflation data on Tuesday for potential market-moving insights. As of the latest update, USD/CHF is trading at 0.8777, reflecting a 0.04% increase for the day.
Federal Reserve Chair Jerome Powell, in his semi-annual testimony last week, asserted the robustness of the US economy and indicated the Fed’s proximity to gaining confidence in the downward trajectory of inflation, paving the way for rate cuts. According to the CME FedWatch Tools, futures markets are currently pricing in approximately a 70% likelihood that the Fed will initiate interest rate cuts by mid-June, with a full percentage point reduction expected by the end of the year.
Recent employment data from the US Labor Department revealed that the economy added 275,000 jobs in February, surpassing January’s figure of 229,000 and exceeding the estimated 200,000. Concurrently, the Unemployment Rate in the US climbed to 3.9% in February from 3.7% in January, marking its highest level in two years. Despite the positive job additions, Average Hourly Earnings, measuring wage growth, showed a modest increase of 4.3% YoY in February, falling slightly below the market consensus of 4.4%.
Turning attention to the Swiss front, ongoing geopolitical tensions in the Middle East and economic uncertainties in major countries are influencing safe-haven demand, benefiting the Swiss Franc (CHF). Over the weekend, Hamas leader Ismail Haniyeh accused Israel of hindering cease-fire talks and rejecting Hamas’ plea to halt the bloodshed in Gaza. Simultaneously, escalating tensions in Russia and neighboring territories are raising concerns about a potential war escalation beyond Ukraine.
Traders are poised to monitor key US economic indicators, with the February CPI and Retail Sales scheduled for release on Tuesday and Thursday, respectively. The headline CPI figure is anticipated to remain steady at 3.1% YoY in February, while Retail Sales are expected to show improvement at 0.7%. Market participants will keenly observe these data points for potential trading opportunities surrounding the USD/CHF pair.
