USD/CHF struggles around 0.8950 amid falling US yields

• USD/CHF faces challenges as US Dollar retreats amid lower yields.
• Strong US PMI data has fueled speculation about a delay in the Fed’s rate cut, which in turn supports the Dollar.
• The Swiss Franc could face further difficulties as the SNB is expected to implement another rate cut in September.

USD/CHF gives back its gains from the last three sessions, trading around 0.8930 during the early European session on Monday. The Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is down near 105.70. This downward correction could be attributed to the decline in the 2-year and 10-year US Treasury bond yields, standing at 4.73% and 4.25%, respectively, at the time of writing.

The US Dollar’s (USD) decline could be limited as the higher-than-expected US Purchasing Managers’ Index (PMI) on Friday fueled speculation of a delay in the U.S. interest rate cut. Federal Reserve. According to the CME’s FedWatch tool, investors are pricing in a nearly 65.9% chance of a Fed rate cut in September, up from 70.2% the previous week.

The US Composite PMI for June beat expectations, rising to 54.6 from May’s reading of 54.5. This figure marked the highest level since April 2022. The Manufacturing PMI rose to a reading of 51.7 from a figure of 51.3, beating the forecast of 51.0. Similarly, the services PMI rose to 55.1 from 54.8 in May, beating the consensus estimate of 53.7.

The Swiss Franc (CHF) struggled against the US Dollar (USD) after the Swiss National Bank (SNB) decided to cut rates for the second time this year, lowering rates from 1.50% to 1.25% on Thursday.

Additionally, SNB President Thomas Jordan said the CHF has strengthened significantly in recent weeks, adding that the central bank is ready to intervene in the currency market, according to Reuters. This could have pressured the Swiss Franc and supported the USD/CHF pair.

Traders are likely to look at expectations from the ZEW survey, which will be published by the Center for European Economic Research on Wednesday. This survey will present business and employment conditions in Switzerland.