USD/CHF Strengthens To Around 0.8950

USD/CHF ended a two-day losing streak in early European trading on Friday, trading around 0.8940. USD/CHF was supported by a stronger dollar as the Fed’s hawkish outlook indicated only one rate cut in 2024. Investors awaited the initial reading of the Michigan Consumer Confidence Index and a speech by Chicago Fed President Austan Goolsbee on Friday for new trading momentum.

On Thursday, the U.S. Producer Price Index rose 2.2% year-on-year in May, compared with an increase of 2.3% in April (revised 2.2%), below the expected value of 2.5%. Despite the weak U.S. economic data, the Fed’s hawkish stance provided some support for the dollar and prevented USD/CHF from falling.

According to the dot plot, the Fed said it would cut its key interest rate by 25 basis points by the end of 2024. The new forecast comes after the Fed decided to keep interest rates at their current 23-year high, even as inflation has moved lower.

In Switzerland, the Swiss Federal Statistical Office reported on Thursday that the monthly rate of producer and import prices in Switzerland in May was -0.3%, while it rose by 0.6% in April, which was 0.5% lower than expected. In addition, the market expects the Swiss National Bank (SNB) to keep interest rates unchanged in June, which may boost the Swiss franc (CHF). In addition, the uncertainty in the Middle East and continued geopolitical tensions may drive safe-haven flows, thus boosting the Swiss franc at present.

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