On Wednesday, USD/CHF dipped slightly as the US Dollar (USD) showed broad weakness, allowing the Swiss Franc (CHF) to recover some value. Currently, the pair is trading around 0.8078, reflecting a decrease of about 0.20% for the day.
A significant upsurge in the Japanese Yen (JPY) is driving the decline of the Greenback, while the US-Iran conflict in the Middle East continues to influence market sentiment alongside rising oil prices. West Texas Intermediate (WTI) crude is hovering around $93.50 per barrel, a level not seen since June 8.
The US Dollar Index (DXY), which measures the Greenback’s strength against a set of six major currencies, is at approximately 98.67, close to its lowest point since August 21. Despite expectations of a hawkish stance from the Federal Reserve (Fed), the Greenback feels the squeeze, particularly with oil prices remaining high, which adds to the rationale for hiking interest rates.
Consequently, US Treasury yields are on the rise, with the benchmark 10-year yield around 4.80%, nearing its peak since November 2023. The Treasury is anticipated to reveal the size of its bond buyback at 15:00 GMT, having previously indicated plans to purchase at least $4 billion in long-term debt.
As we look ahead to the Fed’s meeting on September 15-16, US inflation data is coming into focus. The Fed has been vocal about its goal to bring inflation back to the 2% target, so forthcoming readings might heavily influence whether interest rates will see an increase.
The Producer Price Index (PPI) is expected Thursday, followed by the Consumer Price Index (CPI) on Friday. If inflation numbers come in hotter than anticipated, that could bolster expectations for a rate hike in September and support the US Dollar. In contrast, softer results might leave the Greenback more susceptible to further declines.
That said, the Swiss National Bank’s (SNB) zero interest rate policy and its readiness to prevent excessive strengthening of the Franc could help limit declines for USD/CHF.
