USDCHF weakened to around the 0.8500 level amid concerns about US economic growth, following a disappointing jobs report. This has led to speculation, that the Fed may need to cut rates three times this year instead of two. Moreover, concerns about an economic slowdown have prompted investors to adopt asset hedging strategies.
On the other hand, Switzerland’s annual inflation rate came in at 1.3% in July, unchanged from the previous month and in line with market expectations, reinforcing expectations of a third consecutive rate cut by the Swiss National Bank in September. Previously, the SNB started its monetary easing earlier than global peers and has reduced borrowing costs in both decisions this year.
A Bloomberg survey showed that the majority of economists expect an additional 25 basis points cut in September, while traders speculate on further easing. The combination of economic uncertainty and geopolitical tensions, particularly in the Middle East, could prompt increased safe haven demand for the Swiss Franc, lending further support to the CHF.
Elsewhere, Fed Governor Michelle Bowman highlighted her cautious approach to policy adjustment, emphasising that overreacting to isolated data points could undermine the progress made so far. This dovish stance by the Fed, coupled with rising rate cut expectations, could exert downward pressure on USDCHF.
From a technical perspective, USDCHF’s rebound from 0.8431 proved to be short-lived, having been unable to move further above 0.8747. Further downside could test 0.8431 and further up to the crucial low of 0.8331. Nonetheless, traders are likely to be cautious over a possible rebound following today’s better PMI data report. A break to the upside, against 0.8560 minor resistance opens the door for 0.8614 support which is now resistance. However, the bearish trend will persist, as long as the pair trades below 0.8747.
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Ady Phangestu
Market Analyst – HF Educational Office – Indonesia
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