The USD/CHF currency pair is extending its losses for the second consecutive day, trading around 0.8490 during Friday’s Asian session. The pair’s decline reflects a weaker US Dollar (USD), driven by recent US economic data that bolsters expectations for a significant interest rate cut by the Federal Reserve (Fed) next week.
The CME FedWatch Tool indicates that markets are fully anticipating at least a 25 basis point (bps) rate cut from the Federal Reserve at its September meeting. The probability of a 50 bps cut has surged to 41.0%, a sharp increase from 14.0% just a day earlier.
The USD’s decline is further exacerbated by falling US Treasury yields. The US Dollar Index (DXY), which tracks the USD against six major currencies, is trading around 101.10. At the time of writing, 2-year and 10-year US Treasury yields are at 3.58% and 3.64%, respectively.
Former New York Fed President William Dudley has suggested a compelling case for a 50 basis point rate cut, noting at the Bretton Woods Committee’s Future of Finance Forum in Singapore that “there’s a strong case for 50, whether they’re going to do it or not,” according to Reuters.
In Switzerland, the Consumer Price Index (CPI) for August fell to 1.1% year-on-year, with no monthly change against a forecasted 0.1% rise. This has intensified speculation about a possible rate cut by the Swiss National Bank (SNB) in its upcoming September meeting. The market anticipates a 25 basis point reduction from the SNB, with traders closely watching next week’s Trade Balance data for further indications of potential rate cuts by year-end.
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