During the early European trading session on Wednesday, the USD/CHF pair maintained a flat trajectory around the 0.9125 mark. Traders are exercising caution as they brace for significant inflation data releases later in the week. Additionally, attention is focused on the release of the Fed’s Beige Book report and a scheduled speech by Fed official John Williams.
The US Federal Reserve (Fed) is currently not anticipated to implement rate cuts until later in the year, given the persistent nature of inflationary pressures. Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, underscored this stance, noting that while the Fed’s policy remains restrictive, the possibility of further rate hikes cannot be discounted. Market sentiment reflects this cautious outlook, with CME FedWatch tool indicating a nearly 50% probability of the Fed maintaining rates in September.
Recent data from the US Conference Board revealed an improvement in Consumer Confidence for May, surpassing expectations and rising to 102.0 from April’s 97.5. Despite this positive development, concerns regarding inflation persist, with consumers anticipating higher interest rates in the coming year. This dynamic continues to bolster the Greenback and provide support to the USD/CHF pair.
Looking ahead, Switzerland’s State Secretariat for Economic Affairs (SECO) is set to release the nation’s Gross Domestic Product (GDP) data on Thursday. Projections suggest a QoQ expansion of 0.3% for the first quarter of 2024. A stronger-than-expected GDP reading could lend support to the Swiss Franc (CHF).
In the backdrop of economic developments, geopolitical tensions in the Middle East remain a focal point for investors. Recent reports of Israeli forces shelling a tent camp in a designated “safe zone” west of Rafah, resulting in casualties, underscore the volatility in the region. Any escalation of geopolitical risks may further elevate demand for safe-haven assets like the CHF, potentially limiting upside potential for the USD/CHF pair.
