The USD/CHF currency pair is experiencing continued selling pressure, trading around 0.8810 during the early European session on Friday. Despite stronger-than-anticipated US economic data released on Thursday, the Greenback has edged lower. A global stock market sell-off, particularly within the technology sector, has triggered a flight to safety, benefiting the Swiss Franc (CHF) as a safe-haven currency.
The US economy exceeded expectations in the second quarter (Q2), with real GDP growing at an annualized quarterly rate of 2.8%, up from 1.4% in Q1. Despite this robust growth, expectations for a Federal Reserve (Fed) interest rate cut in September persist. Financial markets are currently pricing in a nearly 93% probability that the Fed will maintain its benchmark interest rate at its July meeting next week, with a potential rate cut anticipated in September, as indicated by the CME FedWatch Tool. This outlook may limit the US Dollar’s (USD) upside potential in the short term.
Global stock market declines, particularly among US tech stocks, coupled with concerns over a slowing Chinese economy, have contributed to the USD’s current weakness. On Thursday, the People’s Bank of China (PBOC) reduced the one-year Medium-term Lending Facility (MLF) rate from 2.50% to 2.30%, heightening worries about the sluggish pace of the Chinese economy.
Looking ahead, the release of the US Personal Consumption Expenditures (PCE) Price Index for June is expected to be a key focus on Friday. The headline PCE is forecasted to increase by 0.1% month-over-month in June, while the Core PCE, the Fed’s preferred inflation measure, is anticipated to decline to 2.5% year-over-year from 2.6% in May. Softer PCE inflation figures could reinforce the case for a Fed rate cut in September, potentially exerting additional selling pressure on the Greenback. Conversely, stronger-than-expected inflation data might reduce rate cut expectations, providing some support to the USD.
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