CFD Trading Rate US Dollar vs Swiss Franc (USDCHF)

• USD/CHF faces challenges due to rising dovish sentiment surrounding the Fed’s policy outlook.
• The weaker US Consumer Confidence Index contributes to dovish expectations for the Fed for its upcoming policy decisions.
• The Swiss Franc may struggle as SNB is expected to implement a 25 basis point rate cut on Thursday.

USD/CHF extends its losses for the third successive day, trading around 0.8420 during the Asian hours on Wednesday. This downside of the pair could be attributed to the subdued US Dollar (USD) following the strengthening dovish sentiment surrounding the US Federal Reserve’s (Fed) policy outlook.

On Tuesday, the weaker US consumer confidence data added to dovish expectations for the Federal Reserve (Fed) for its upcoming policy decisions. US Consumer Confidence Index fell to 98.7 in September from a revised 105.6 in August. This figure registered the biggest decline since August 2021.

However, Federal Reserve Governor Michelle Bowman stated on Tuesday that key inflation indicators are still "uncomfortably above" the 2% target, urging caution as the Fed moves forward with interest rate cuts. Despite this, she expressed a preference for a more conventional approach, advocating for a quarter percentage point reduction.

The downside of the USD/CHF pair could be restrained as the Swiss Franc (CHF) may receive downward pressure as the Swiss National Bank (SNB) is expected to lower rates by 25 basis points (bps) on Thursday. Additionally, the probability of a 50-bps cut has increased, with markets now seeing a one-in-three chance, up from zero a month ago.

Traders will likely observe the ZEW Survey – Expectations (Sep) scheduled to be released on Wednesday, which may provide insights into the business and employment conditions in Switzerland.

• USD/CHF adds nominal gains as the Swiss Franc is weighed down by uncertainty ahead of the SNB’s policy decision.
• The SNB is expected to cut interest rates for the third straight time.
• Growing expectations for Fed large rate cuts in November keep the US Dollar under pressure.

The USD/CHF pair is marginally higher to near 0.8480 in Tuesday’s European session. The Swiss Franc asset edges higher as the Swiss Franc (CHF) weakens amid uncertainty ahead of the Swiss National Bank’s (SNB) interest rate decision, which will be announced on Thursday.

The SNB is widely anticipated to cut interest rates by 25 basis points (bps) to 1%. This would be the third straight quarter-to-a-percentage rate cut as inflation in the Swiss economy has been sustained below the bank’s target of 2% since June 2023. In August, the annual Consumer Price Index (CPI) decelerated further to 1.1%, the lowest from April of this year.

Meanwhile, the Swiss Franc asset gains despite the US Dollar (USD) retreats as growing concerns over the United States (US) job growth have stoked market expectations for second straight Federal Reserve (Fed) 50 bps interest rate cut in the November meeting. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, declines to 100.80.

“The Federal Reserve to cut rates by another 50 basis points in November, a decision that will largely depend on incoming data, especially the next monthly jobs report,” according to strategists from Citi.

Later this week, investors will pay close attention to the US Personal Consumption Expenditure Price Index (PCE) for August, which will be published on Friday. The US core PCE inflation, a Fed’s preferred inflation gauge, is estimated to have accelerated to 2.7% from 2.6% in July.

USD/CHF may not break above its four-week range of 0.8400-0.8550, even if SNB thinks a strong CHF was curbing imported inflation and hurting Swiss exporters amid weak demand from Europe, DBS’s FX analyst Philip Wee notes.

SNB needs a weaker CHF

“On September 26, the Swiss National Bank should lower rates a third time by 25 bps to 1%.”

“Last week, the Swiss State Secretariat (SECO) for Economic Affairs forecast CPI inflation decelerating to 0.7% in 2025 from 1.2% in 2024, aligning with the SNB’s view that a strong CHF was curbing imported inflation and hurting Swiss exporters amid weak demand from Europe.”

“However, USD/CHF may not break above its four-week range of 0.8400-0.8550. CFTC data suggested that its fall has been driven by an unwinding of short CHF positions, reflecting aggressive Fed cut expectations.”