USD/CHF remains below 0.8900 due to dovish sentiment surrounding the Fed.

• USD/CHF weakens as traders expect Fed to cut rates in September.
• NBC News projected that Vice President Kamala Harris had secured the backing of a majority of Democratic Party delegates.
• The Swiss franc could limit its rise as the SNB could cut interest rates further.

The USD/CHF halts its three-day winning streak, trading around 0.8890 during the Asian session on Tuesday. The US Dollar (USD) is facing pressure as expectations of a Federal Reserve (Fed) rate cut in September increase. Last week, Fed Chair Jerome Powell noted that the three US inflation readings this year “increase some confidence” that inflation is on track to meet the Fed’s target sustainably, implying that interest rate cuts could be approaching.

Additionally, Federal Reserve Bank of New York President John Williams commented on Friday that the long-term trends that led to lower neutral interest rates before the pandemic are still in effect. Williams stated, “My own Holston-Laubach-Williams estimates for r-star in the U.S., Canada, and the euro area are roughly at the same level as before the pandemic,” Bloomberg reported.

On Monday, Democrats united behind Vice President Kamala Harris as the front-runner for the presidential nomination. NBC News projected that Harris had secured the backing of a majority of the Democratic Party’s pledged delegates to the convention. The threshold to secure the nomination is 1,976 delegates, and NBC estimates that Harris has received the support of 1,992 delegates, either through spoken or written endorsements.

On the CHF front, traders anticipate that the Swiss National Bank (SNB) could further reduce interest rates in September, which could put downward pressure on the Swiss Franc (CHF). This potential rate cut is driven by subdued inflationary pressures and the resilience of the CHF.

Kyle Chapman, FX market analyst at Ballinger Group, commented, “I expect the SNB to implement a third rate cut next quarter, with a possible fourth cut in December if there remains strong confidence in the need for tight monetary policy.”