USD/CHF Holds Steady as Fed Rate Cut Bets Pressure US Dollar

The exchange rate for USD/CHF has remained steady around 0.8050 as of Thursday, as market expectations for a potential rate cut by the Federal Reserve weigh on the US Dollar. Despite fluctuations in the broader labor market data, the anticipation of a rate cut continues to exert pressure on the dollar.

According to the CME FedWatch tool, markets project an approximately 85% chance of a 25-basis-point rate cut during the Federal Reserve’s meeting in December. This sentiment persists even in light of generally positive economic indicators from the United States. For instance, initial jobless claims for the week ending November 22 increased to 216,000, which is below the anticipated 225,000, indicating a degree of resilience in the labor market. Although continuing claims rose slightly from 1.95 million to 1.96 million, this has been largely factored into market expectations.

The release of durable goods orders on Wednesday surprised analysts by exceeding forecasts; nevertheless, the perception of a dovish shift in monetary policy remains dominant. Speculation surrounding a potential successor to current Fed Chair Jerome Powell has intensified, particularly regarding Kevin Hassett, who is viewed as an advocate for lower interest rates.

Market conditions have been further influenced by thin liquidity due to the Thanksgiving holiday in the United States, which has limited volatility across US assets. At the time of writing, the US Dollar Index stands near 99.57, reflecting the inability of the dollar to capitalize on stronger economic data.

In Switzerland, analysts widely expect the Swiss National Bank to maintain its policy rate at 0.00% potentially through 2027. This policy divergence contributes to the downward pressure on USD/CHF, as it reinforces the attractiveness of the Swiss Franc relative to the US Dollar.

As traders look ahead, two significant data releases from Switzerland are scheduled for Friday. These include the third-quarter Gross Domestic Product (GDP) and the KOF Leading Indicator, both of which are anticipated to provide greater clarity regarding the Swiss economy’s trajectory. Until these releases, USD/CHF will likely continue to navigate a challenging environment for the US Dollar, dominated by expectations surrounding Federal Reserve policy adjustments.

The following table illustrates the percentage change of the US Dollar against other major currencies as of today. The US Dollar shows slight strength against the Swiss Franc, but remains under pressure overall.

In summary, the USD/CHF exchange rate remains under pressure due to expectations of a Federal Reserve rate cut and a generally stable performance of the Swiss economy. As the market awaits critical economic data from Switzerland, the outlook for the US Dollar appears uncertain amid shifting monetary policy expectations.