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- USD/CHF strengthens as Markets expect the Fed to keep interest rates steady ahead of upcoming economic data.
- Improving AI sentiment and upcoming tech earnings reduced demand for US Treasury bonds.
- Swiss policymakers see inflation risks as contained, expecting stable interest rates through 2027.
USD/CHF gains ground for the fourth consecutive day, trading around 0.8300 during Asian hours on Wednesday. The pair appreciates as the US Dollar (USD) gains ground amid market caution ahead of the US Federal Reserve’s (Fed) interest rate decision due later in the day. Investors are also closely monitoring key economic releases, including GDP growth and the Personal Consumption Expenditures (PCE) price index, for further clues regarding the future path of monetary policy.
The Fed is widely expected to keep its benchmark interest rate unchanged at the current target range of 3.75% to 4.0% on Wednesday. According to the CME FedWatch tool, markets are pricing in a 92.8% probability of a rate hold at this meeting, while the probability of a rate hike in December stands at 84.4%. Traders will be paying sharp attention to Fed Chair Kevin Warsh’s remarks for any subtle hints regarding the central bank’s economic outlook.
Meanwhile, demand for safe-haven Treasury bonds has weakened as market sentiment surrounding artificial intelligence improves. Upcoming earnings reports from major technology companies are expected to provide fresh insight into AI-related demand—a sector that has been a significant driver of US economic growth—reversing some of the safe-haven flows triggered by the recent global tech sell-off.
The Swiss National Bank (SNB) Meeting Minutes revealed that policymakers noted rising inflationary pressures but saw no signs of broader spillover effects across the economy, attributing the inflation uptick primarily to higher oil prices and a weaker franc. The SNB maintained its policy rate at 0%, with Chair Schlegel stating that no adjustments are currently necessary given overall price stability. While economists anticipate rates will remain on hold through 2027, financial markets are beginning to price in a potential rate hike in early 2027.
USD/CHF advance extends but UOB doubts break of major resistance
Strategists at UOB Group note that USD/CHF continued to grind higher at the start of the week, with the Dollar “rising to a high of 0.8294 before closing at 0.8290 (+0.23%).” They recall that when the pair was trading near 0.8270, they had already flagged that “conditions are overbought after the sharp rise over the past two days, but there is scope for USD to test 0.8290,” while also stressing that “a sustained advance above this level is unlikely.”
Looking ahead, UOB observes that “downward momentum is starting to slow, and conditions remain overbought,” yet the latest move higher “is not showing signs of pausing just yet.” For the coming session, they judge that USD “could edge higher, but any advance is unlikely to reach the major resistance at 0.8320,” with initial support now seen at 0.8270.
