The USD/CHF currency pair has maintained a positive stance, trading above 0.8800 and reaching near 0.8835 during the early European session on Wednesday. This upward movement is being driven by the strengthening of the US Dollar, which in turn is influenced by the growing expectations of a less dovish approach from the US Federal Reserve.
As the market gears up for crucial events, all eyes are on the US November Consumer Price Index (CPI) data that is set to be released later on Wednesday. This data will serve as the final significant piece of information for Fed officials as they prepare to convene next week to determine the course of interest rates. Even a moderate increase in the CPI figures is not likely to dissuade policymakers from implementing a quarter-point reduction in the key rate. In fact, the odds are quite high for a 25 basis points rate cut at the Fed’s December meeting, with a significant 86% of traders anticipating such a move, as indicated by the CME FedWatch tool.
Turning to the Swiss side of the equation, the Swiss National Bank (SNB) is widely forecasted to cut its interest rate by a quarter point to 0.75% at its December meeting on Thursday. Christian Schulz, the deputy chief European economist at Citi, commented that while a 25 basis points rate cut might come across as a slightly hawkish surprise given the market pricing, there seems to be no compelling reason – and also little likelihood of achieving lasting success in terms of the exchange rate – for larger cuts. This is due to the resilient Swiss economy and the relatively stable exchange rate. Nevertheless, Schulz anticipates that the SNB will once again downgrade its short-term forecasts, and its guidance is likely to maintain a dovish tone.
Overall, traders and investors will be closely monitoring these developments, as the outcomes of the US CPI data release and the SNB’s interest rate decision are set to have a significant impact on the future movements of the USD/CHF pair.
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