The USD/CHF currency pair is aiming to revisit the 0.8950 level, striving to reclaim an almost five-month high of 0.8960, thanks to the current weakness in the Swiss Franc (CHF).
On Thursday, the Swiss National Bank (SNB) took an unexpected step by cutting its interest rates by 50 basis points (bps), bringing them down to 0.5%. Market participants had initially anticipated a 25 bps cut, but the SNB was concerned about the risks of inflation falling below its target and the growing concerns regarding global markets due to potential tariffs from the incoming US President-elect Donald Trump.
After this larger-than-expected rate cut decision, SNB Chairman Martin Schlegel stated that with the current easing of monetary policy, they were countering the lower inflationary pressure. Looking ahead at the interest rate outlook, Schlegel added that the bank would continue to closely monitor the situation and make necessary adjustments to its monetary policy to ensure inflation remains within the range consistent with price stability over the medium term.
At the same time, the US Dollar (USD) has given up its intraday gains and turned negative. This is because the Federal Reserve (Fed) is widely expected to cut its key borrowing rates by 25 bps to the range of 4.25% – 4.50% in its policy meeting on Wednesday. The US Dollar Index (DXY), which tracks the dollar’s value against six major currencies, has fallen back to near 106.75 after facing selling pressure above 107.00.
While it’s quite certain that the Fed will cut interest rates next week, there’s an expectation that it will pause its policy-easing cycle in January. The reason for this is that progress in disinflation seems to have stalled. According to the CME FedWatch tool, there’s a 77% chance that the Fed will keep interest rates unchanged next month.
Related topics:
Canadian Dollar’s Friday Plunge Amid Mixed Job Data
NZD/JPY Price in Decline with Bearish Outlook
