The USD/CHF pair is seeing a decline near 0.8800 as the US economy data looms. Despite stronger-than-expected US economy data, the Greenback is dropping, and the global stock market sell-off is causing a flight to safety, benefitting safe-haven currencies like the Swiss Franc (CHF).
The US economy grew faster than expected in the second quarter, with a 2.8% expansion in real GDP compared to 1.4% in the previous quarter. Despite this, expectations of a September interest rate cut from the Federal Reserve (Fed) remain high. The likelihood of a rate cut in September is around 93%, according to the CME FedWatch Tool. This expectation could limit the upside for the US Dollar (USD) in the short term.
Negative sentiment in global stock markets, especially in US technology stocks, along with fears of a Chinese economic slowdown, are contributing to the decline of the USD. The recent rate cut by the People’s Bank of China (PBOC) raised concerns about the Chinese economy and added to the downward pressure on the USD.
The focus for Friday is on the release of the US Personal Consumption Expenditures (PCE) – Price Index for June. The PCE is expected to show a slight increase month-over-month, while the Core PCE is projected to drop slightly year-over-year. Softer US PCE inflation reports could lead to a Fed rate cut in September and push the USD lower. On the other hand, higher-than-expected inflation readings could reduce rate cut expectations and support the USD.
The Swiss Franc (CHF) is considered a safe-haven asset, with its value determined by market sentiment, economic health, and actions by the Swiss National Bank (SNB). The currency is heavily influenced by the Eurozone due to the high dependency of the Swiss economy on its neighbors. The SNB meets quarterly to decide on monetary policy, aiming for an inflation rate of less than 2%. Economic data releases in Switzerland are crucial for assessing the state of the economy and can impact the valuation of the CHF.
Switzerland’s economy is stable, but changes in economic growth, inflation, and other factors can affect the Swiss Franc. The country’s reliance on the Eurozone makes it vulnerable to any instability in the region. The correlation between the Euro (EUR) and the CHF is significant, with some models suggesting it is close to perfect.
In conclusion, the USD/CHF pair is experiencing a decline as the US economy data approaches. The focus is on the US PCE inflation reports and the potential impact on the USD. Meanwhile, the Swiss Franc remains a safe-haven asset influenced by various factors, including the Eurozone’s stability.
