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USD/CHF remains in positive territory above 0.8950, Fed’s Powell testimony awaited

  • USD/CHF is trading on a stronger note near 0.8980 in the early European session on Tuesday.
  • US Dollar eases on potential Fed rate cut in September
  • Political uncertainties both in Europe and globally could support the CHF.

The USD/CHF pair is trading in positive territory for the second consecutive day around 0.8980 on Tuesday during the early European session. Meanwhile, the USD Index (DXY) is consolidating near the 105.00 level ahead of Federal Reserve (Fed) Chair Jerome Powell’s semi-annual monetary policy testimony on Tuesday.

The growing expectation that the US Fed will start cutting interest rates sooner than expected has dragged the dollar lower. Powell’s testimony could offer some clues as to whether the possibility of a September rate cut has improved with the latest data. If Powell issues hawkish comments, this could provide some support for the US Dollar (USD). Financial markets are now pricing in a nearly 76% probability of a Fed rate cut in September, up from 71% last Friday, according to the CME FedWatch tool.

Market participants will focus their attention on the US Consumer Price Index, which will be released on Thursday. The US CPI is estimated to show a 3.1% year-on-year increase in June, compared with a 3.3% increase in May. Core inflation is projected to remain stable at 3.4% year-on-year in June.

On the Swiss front, political uncertainties both in Europe and globally could boost a safe-haven currency like the Swiss Franc (CHF). However, more moderate inflationary pressures in Switzerland could lead the Swiss National Bank (SNB) to continue cutting interest rates. This, in turn, will likely weigh on the CHF and create a tailwind for the USD/CHF in the near term.

Source: Fx Street

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