The USD/CHF currency pair extended its losses for the second consecutive day on Thursday, trading around 0.8810 during the early Asian-European session. The Swiss Franc (CHF) gained strength as a safe-haven asset amid rising global economic uncertainty.
The decline in global stock markets has heightened negative sentiment towards risk assets, prompting investors to seek refuge in the Swiss Franc. U.S. stock indices have fallen, driven by substantial losses in technology stocks exacerbated by disappointing quarterly earnings from major U.S. tech companies, including Tesla and Alphabet. Additionally, Japanese shares have dropped to five-week lows as the technology sector’s downturn worsens.
Compounding the situation are growing concerns over China’s economic health. On Monday, the People’s Bank of China (PBoC) surprised markets by cutting the one-year Medium-term Lending Facility (MLF) rate from 2.50% to 2.30%. Furthermore, the Bank of China announced a 10-20 basis points reduction in time deposit rates, further stoking fears of economic weakness.
Despite these pressures, the U.S. Dollar may limit its declines. Recent U.S. PMI data indicated faster expansion in private-sector activity for July, highlighting the resilience of U.S. economic growth despite high interest rates. This data could provide the Federal Reserve (Fed) with more flexibility to maintain its restrictive policy stance if inflation remains stubbornly high.
Investors will closely watch upcoming U.S. economic reports, including the Gross Domestic Product (GDP) Annualized (Q2) data scheduled for release on Thursday and the Personal Consumption Expenditures (PCE) inflation data on Friday. These reports are expected to offer critical insights into the economic conditions in the United States.
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