In early European trading hours on Tuesday, the USD/CHF pair broke free from its recent downtrend around the 0.8970 mark, buoyed by developments in both Swiss inflation figures and key US economic indicators.
The Swiss Franc (CHF) encountered selling pressure following the release of Swiss inflation data, which fell short of expectations. Switzerland’s Consumer Price Index (CPI) registered a year-on-year (YoY) increase of 1.4% in May, in line with the previous reading, but missed market forecasts. Moreover, the monthly CPI inflation for May climbed by 0.3% month-on-month (MoM), falling short of the consensus estimate of 0.4%. The subdued inflation data prompted speculations of a potential rate cut by the Swiss National Bank (SNB) on June 28, exerting downward pressure on the CHF. Nevertheless, the CHF’s downside potential may be mitigated as SNB President Thomas Jordan hinted at the prospect of the central bank intervening in foreign exchange markets to curb inflationary pressures.
Conversely, in the United States, the Personal Consumption Expenditures (PCE) inflation remained unchanged in April, while the ISM Manufacturing Purchasing Managers’ Index (PMI) for May came in weaker than anticipated. These indicators raised speculation of the Federal Reserve (Fed) implementing its first rate cuts as early as September, potentially weighing on the USD against the CHF. Market focus is now shifting to the upcoming US employment data release on Friday.
Forecasts project the US Nonfarm Payrolls (NFP) to show an addition of 190,000 jobs in May, with the Unemployment Rate expected to maintain stability at 3.9% during the same period. Any indications of a weaker labor market performance could further undermine the Greenback, posing challenges for the USD/CHF pair in its upward trajectory.
As traders await the forthcoming economic data, the USD/CHF pair remains poised to respond to evolving market dynamics, with the interplay between Swiss and US economic indicators likely to shape its near-term trajectory.
Related Topics:
