In the foreign exchange market, the USD/CHF currency pair is eyeing a return to the 0.8950 level. The Swiss Franc has weakened, enabling the pair to strive for a near five-month high of 0.8960.
On Thursday, the Swiss National Bank (SNB) took an unexpected step by slashing its interest rates by 50 basis points, bringing them down to 0.5%. This move came as the central bank was concerned about the risk of inflation falling short of its target and the potential impact of tariffs under the incoming US administration on global markets. SNB Chairman Martin Schlegel noted that the rate cut was aimed at countering lower inflationary pressure and added that the bank would closely monitor the situation and adjust policy as needed to maintain price stability in the medium term.
Concurrently, the US Dollar initially gave up its intraday gains and turned negative. Market participants widely expect the Federal Reserve (Fed) to reduce its key borrowing rates by 25 basis points to the 4.25%-4.50% range in its policy meeting on Wednesday. The US Dollar Index (DXY), which measures the dollar’s value against six major currencies, dropped back to around 106.75 after facing selling pressure above 107.00.
While the Fed is likely to cut rates next week, there is speculation that it may pause its policy-easing cycle in January. The CME FedWatch tool indicates a 77% probability that the Fed will keep interest rates steady next month.
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