The USD/CHF pair is trading weaker around 0.8960 during the early European session on Friday. This downtick is driven by a softer US Dollar (USD) following unexpected declines in US consumer prices in June. Investors are now looking to the US June Producer Price Index (PPI) and the preliminary July Michigan Consumer Sentiment gauge, which are set to be released later on Friday, for further direction.
According to the Bureau of Labor Statistics, the US Consumer Price Index (CPI) fell by 0.1% month-on-month in June after remaining unchanged in May, marking the lowest monthly reading since May 2020. On an annual basis, CPI rose 3% year-on-year, the lowest in a year. This softer inflation data has fueled expectations that the Federal Reserve (Fed) may cut interest rates in the coming months.
Early Friday, Chicago Fed President Austan Goolsbee described the latest inflation data as “excellent,” indicating that the Fed is on track to meet its 2% target. Similarly, St Louis Fed President Alberto Musalem acknowledged “encouraging further progress” towards the inflation target. San Francisco Fed President Mary Daly stated that the cooling price pressures strengthen the case for rate cuts, though the timing remains debatable. The USD is edging lower amid growing speculation of a Fed rate cut this year, with CME Group’s FedWatch Tool indicating an 85% chance of easing in September.
On the Swiss front, geopolitical tensions, political uncertainty in the US and Europe, and concerns about a global economic slowdown could boost safe-haven assets like the Swiss Franc (CHF). However, expectations that the Swiss National Bank (SNB) might further cut interest rates could apply some selling pressure on the CHF.
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