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- USD/CHF edges lower to near 0.7920 despite traders trimming Fed dovish bets.
- Fed officials stressed maintaining slight restrictiveness in the monetary policy as inflation is well above target.
- Swiss Producer and Import prices surprisingly declined by 0.3% in October.
The USD/CHF pair ticks down to near 0.7920 during the late Asian trading session on Friday. The Swiss Franc pair struggles to gain ground after revisiting an over three-week low of 0.7910 posted on Thursday. The pair is under pressure as the US Dollar (USD) underperforms even as traders have trimmed bets supporting an interest rate cut by the Federal Reserve (Fed) in the December policy meeting.
During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges lower to near 99.15. The USD Index remains close to its two-week low of 99.00 posted on Thursday.
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 meeting has diminished to 50.7% from 63% seen on Thursday.
Fed dovish bets have receded as few Federal Open Market Committee (FOMC) members have been stressing the need to exercise caution on interest rate cuts as inflationary pressures remain well above the central bank’s 2% target.
“Policy closer to neutral than modestly restrictive, and the Fed needs to continue to lean against inflation,” St. Louis Fed President Alberto Musalem said at the Economic Impact & Policy Forum hosted by the University of Evansville, in Indiana, on Thursday.
Meanwhile, the Swiss Franc trades broadly firm as Swiss National Bank (SNB) officials have expressed confidence that inflation will increase in the coming quarters. Contrary to officials’ guidance, Swiss Producer and Import Prices data for October have come in surprisingly negative. Inflation at the wholesale level declined at a faster pace of 0.3% month-on-month against a 0.2% drop in September. Economists expect the producer inflation to have risen by 0.1%.
