Swiss Franc eyes first weekly gain in five weeks as weak NFP delays Fed hikes
USD/CHF heads for its first weekly loss in five weeks as weaker-than-expected US Nonfarm Payrolls (NFP) data released on Thursday weighed on the US Dollar (USD). The pair rebounds on Friday as the Greenback stabilizes, with traders reassessing the Federal Reserve's (Fed) interest rate outlook.
At the time of writing, USD/CHF is trading virtually unchanged around 0.8034 after touching an intraday low of 0.8010. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is trading around 100.84, recovering from an intraday low of 100.61.
The lack of follow-through selling in the US Dollar (USD) after the weak NFP print suggests the data merely delayed expectations of Federal Reserve (Fed) interest rate hikes.
Traders continue to expect monetary policy to remain restrictive as inflation remains above the central bank's 2% target after accelerating in recent months, driven by higher Oil prices.
According to the CME FedWatch Tool, traders are pricing in a 53% probability of a rate hike at the September meeting, down from 63% before the NFP release, while the probability of a December rate hike remains elevated at 76%.
However, the June Consumer Price Index (CPI) report due later this month is likely to provide greater clarity on the Fed's interest rate path, with energy-driven inflation risks easing as Oil prices have retraced most of the gains triggered by the US-Iran war.
In the meantime, the US Dollar's pullback may remain shallow, limiting stronger gains in the Swiss Franc (CHF).
On the Swiss side, the low-inflation backdrop supports the view that the Swiss National Bank (SNB) will maintain its current policy stance, keeping interest rates at 0%. Meanwhile, the central bank continues to warn against excessive strength in the Swiss Franc and remains ready to intervene in the foreign exchange market if necessary.
Looking ahead to next week, traders will focus on the US ISM Services Purchasing Managers Index (PMI) data, followed by the minutes of the Fed's latest policy meeting. The Swiss economic calendar remains empty.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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