The USD/CHF pair recovered from recent losses around 0.8910 during Monday’s early European session, buoyed by a stronger US Dollar (USD) following the Federal Reserve’s (Fed) revised outlook on interest rates for 2024, which now anticipates only one rate cut.
The Fed’s hawkish stance, articulated by Chairman Jerome Powell, indicates a shift towards maintaining higher rates amid concerns over persistent inflation. Powell emphasized the need for convincing evidence of inflation moving towards targets before considering rate cuts, contrasting earlier expectations of multiple cuts.
Market sentiment was also influenced by commentary from Minneapolis Fed President Neel Kashkari, who suggested waiting until December for further rate adjustments, while Cleveland Fed President Loretta Mester acknowledged a potentially prolonged path to achieving the Fed’s inflation target.
Meanwhile, the preliminary University of Michigan Consumer Sentiment Index for June disappointed expectations, reflecting a decline to 65.6 from May’s final reading of 69.1. Despite this, the impact on the USD was limited.
Looking ahead, market focus turns to Switzerland’s SECO Economic Forecasts and Thursday’s Swiss National Bank (SNB) interest rate decision. The SNB is expected to maintain its 1.5% interest rate amidst rising Swiss inflation levels observed since December 2023.
Geopolitical tensions in the Middle East and political uncertainties within the Eurozone, particularly France’s upcoming parliamentary elections following President Emmanuel Macron’s call for early polls, may further influence market sentiment and strengthen the Swiss Franc (CHF) as a safe-haven asset against the USD.
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