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- USD/CHF consolidates around 0.8050 ahead of Fed’s monetary policy announcement.
- Investors expect the Fed to cut interest rates and refrain from endorsing a dovish outlook.
- The SNB is unlikely to push interest rates into a negative territory in the policy meeting on Thursday.
The USD/CHF pair trades flat around 0.8060 during the late Asian trading session on Wednesday. The Swiss Franc pair consolidates as investors await the monetary policy announcement by the Federal Reserve (Fed), which is scheduled at 19:00 GMT.
During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades flat around 99.20.
The US Dollar struggles to get direction as investors are uncertain over the United States (US) interest rate outlook, while remaining confident that there will be an interest rate cut in Wednesday’s meeting. Market participants doubt that the Fed will take a dovish stance on the monetary policy outlook as inflationary pressures remain well above the 2% target.
According to the CME FedWatch tool, the probability of the Fed cutting interest rates by 25 basis points (bps) to 3.50%-3.75% in the December policy meeting is 87.6%. This will be the third interest rate cut by the Fed in a row.
Going forward, the Swiss Franc (CHF) will also be influenced by the Swiss National Bank’s (SNB) monetary policy announcement on Thursday. The SNB is expected to keep interest rates steady at 0%, and not pushing them into the negative territory, even as the Consumer Price Index (CPI) remained flat on an annualized basis in November.
SNB Chairman Martin Schlegel stated in his recent commentary that the bar to push interest rates into the negative zone is high due to “undesirable side effects” on savers and pension funds.
