USD/CHF holds below 0.8950 amid renewed Fed rate cut hopes, softer US Dollar

• USD/CHF attracts some sellers near 0.8920 in Thursday’s early European session, down 0.20% on the day. 
• Traders raise their bets on Fed rate cuts this year after the cooler PCE inflation and weaker Manufacturing PMI data. 
• The Swiss unemployment rate stood at 2.3% in May, remains unchanged and matched market expectations. 

The USD/CHF pair edges lower to 0.8920 during the early European session on Thursday. The weaker US Dollar (USD) amid growing speculation that the Federal Reserve (Fed) will start lowering borrowing costs from the September meeting creates a headwind for the pair. 

The recent cooler US Personal Consumption Expenditures (PCE) Price Index data released last week and the weaker Manufacturing PMI report earlier this week revived hopes the Fed would cut interest rates this year.  This, in turn, exerts some selling pressure on the USD broadly. Financial markets have priced in about 70% possibility of Fed rate cuts in September, up from 54.9% at the beginning of the week, according to the CME FedWatch tool.

Investors will shift their attention to the release of US May employment data on Friday, including the US Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings. The NFP figure is expected to see 185,000 job additions in May, while the Unemployment Rate is estimated to remain steady at 3.9% in the same period. The softer employment market data might convince the Fed to feel more confident about easing monetary policy.
 
On the Swiss front, the unemployment rate in Switzerland came in at 2.3% in May, according to the State Secretariat for Economic Affairs (SECO) on Thursday. The figure was unchanged from April and matched the estimation. A further report on Tuesday revealed that Switzerland’s monthly Consumer Price Index (CPI) inflation rose 0.3% MoM in May and was below the market consensus of 0.4%. The cooler inflation data prompted the expectation of rate cuts from the Swiss National Bank (SNB) on June 28, and this might weigh on the Swiss Franc (CHF) in the near term.