USD/CHF Holds Below 0.8950 Amid Renewed Hopes Of Fed Rate Cuts & Dollar Weakness

USD/CHF traded lower at 0.8920 during early European trading on Thursday. A weaker dollar has weighed on the pair amid growing speculation that the Federal Reserve (FED) will reduce borrowing costs starting with its September meeting.

Cold US Personal Consumption Expenditures (PCE) price index data released last week and a weak manufacturing Purchasing Managers Index (PMI) report released earlier this week have rekindled hopes that the Fed will cut interest rates this year. This, in turn, has put some selling pressure on the dollar. Financial markets have raised the probability of a Fed rate cut in September to 70% from 54.9% at the beginning of this week, according to the CME FedWatch tool.

Investors will turn their attention to US employment data for May, including US non-farm payrolls (NFP), unemployment rate, and average hourly earnings, due on Friday. Non-farm payrolls are expected to show an increase of 185,000 jobs in May, while the unemployment rate is expected to remain stable at 3.9% during the same period. Weak job market data could give the Fed more confidence in easing monetary policy.

In Switzerland, the unemployment rate was 2.3% in May, according to data released by the Swiss State Secretariat for Economic Affairs (SECO) on Thursday. The figure was the same as in April, in line with estimates. Another report on Tuesday showed that the monthly inflation rate of the Swiss Consumer Price Index (CPI) rose by 0.3% month-on-month in May, lower than the market consensus of 0.4%. The lower inflation data has prompted expectations that the Swiss National Bank (SNB) will cut interest rates on June 28, which may put pressure on the Swiss franc (CHF) in the short term.

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