The Swiss Franc (CHF) continued to trade lower against the US Dollar (USD), holding onto Monday’s losses around 0.8088 during the Asian session on Tuesday [1]. This weakness in the Swiss Franc is attributed to the ongoing strength of the US Dollar, driven by firm market expectations that the Federal Reserve (Fed) will raise interest rates this year [1]. The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, climbed to approximately 101.05, marking its highest level in over a year [1].
According to the CME FedWatch tool, the probability of a Fed rate hike this year stands at nearly 87% [1]. This hawkish sentiment was reinforced by the latest Federal Open Market Committee (FOMC) Economic Projections report, which revealed that nine out of nineteen policymakers now anticipate an interest rate hike in 2024—a significant shift from March, when none projected a hike for this year [1].
Market participants are closely watching upcoming US economic data for further direction. The US Personal Consumption Expenditure Price Index (PCE) for May, a key inflation gauge, is scheduled for release on Thursday, while preliminary US S&P Global PMI data for June is due on Tuesday, with the Services PMI expected to rise to 51.0 from 50.7 in May [1]. On the Swiss side, investors are awaiting the ZEW Survey – Expectations data for June, set to be released on Wednesday [1].
The anticipation of tighter US monetary policy has increased the appeal of the US Dollar, putting additional pressure on the Swiss Franc. The market’s focus remains on upcoming US and Swiss economic indicators for further cues on the direction of both currencies [1].
CONCLUSION
The Swiss Franc remains under pressure against the US Dollar as strong expectations for a Fed rate hike bolster the Greenback. With key US and Swiss economic data releases on the horizon, market participants are likely to remain cautious, awaiting further signals on monetary policy direction.