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IPC Index — Mexico Market
- USD/CHF meets with a fresh supply and is pressured by a combination of factors.
- US recession fears and Fed rate cut bets weigh on the USD and the currency pair.
- The global flight to safety benefits the CHF and contributes to the offered tone.
The USD/CHF pair attracts fresh sellers during the Asian session on Wednesday and erodes a major part of the previous day’s modest recovery gains. Spot prices drop back closer to mid-0.8100s in the last hour and remain well within striking distance of a ten-year low touched last Friday amid a broadly weaker US Dollar (USD).
In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes near its lowest level since April 2022 amid the weakening confidence in the US economy. Furthermore, bets that the Federal Reserve (Fed) will resume its rate-cutting cycle soon and lower borrowing costs by 100 basis points in 2025 continue to dent the appeal for the buck. This, in turn, is seen as a key factor exerting downward pressure on the USD/CHF pair.
Meanwhile, the initial market reaction to US President Donald Trump’s decision last week to pause sweeping reciprocal tariffs for 90 days turned out to be short-lived amid concerns over a US recession and the escalating US-China trade war. Moreover, Trump’s rapidly shifting stance on trade tariffs fuels uncertainty and weighs on investors’ sentiment. This benefits the safe-haven Swiss Franc (CHF) and contributes to the offered tone surrounding the USD/CHF pair.
The aforementioned fundamental backdrop suggests that the path of least resistance for spot prices remains to the downside and supports prospects for an extension of a three-month-old downtrend, from the year-to-date high touched in January. Traders, however, might opt to wait for Fed Chair Jerome Powell’s appearance later during the US session for cues about the rate-cut path. In the meantime, the US Retail Sales data might influence the USD and the USD/CHF pair.
