The USD/CHF currency pair is positioned for potential gains, with market analysts predicting a 25 basis point rate cut from the Swiss National Bank (SNB) in its upcoming announcement. Current estimates indicate a 63% likelihood of this cut occurring during the SNB’s meeting on Thursday. In comparison, forecasts for the Federal Reserve signal nearly a 50% chance of 75 basis points in rate reductions throughout 2024.
As of Thursday morning, the USD/CHF pair is trading around 0.8500, sustaining its recent upward trajectory seen on Wednesday. The Swiss Franc faces possible downward pressure in anticipation of the SNB’s interest rate decision later today.
Market sentiment suggests a prevailing expectation that the Swiss National Bank will opt for a 25 basis point reduction in its September meeting. While a quarter-point cut has garnered significant support, the odds for a more substantial cut stand at 37%.
Recent economic data reflecting the ZEW Swiss Survey Expectations showed a notable decline, dipping by 5.4 points from the previous month to reach -8.8 in September, down from -3.4. This negative trend signifies growing pessimism regarding the Swiss economy’s growth prospects over the coming six months, according to UBS, which collaborates with the CFA Society Switzerland for this indicator.
In contrast, the upside potential for USD/CHF may be constrained due to the weakened position of the US Dollar. Increased expectations of further interest rate cuts from the Federal Reserve contribute to this weakness. Market indicators show approximate odds of 50% for a total reduction of 75 basis points by the Fed to between 4.0% and 4.25% by year’s end.
Traders will be keeping a close eye on the forthcoming release of the final Gross Domestic Product (GDP) figures for the second quarter from the US, which could impact market dynamics further as the North American session unfolds.
