USD/CHF Remains On The Defensive Below 0.8850 Ahead Of SNB Rate Decision

USD/CHF remained weak around 0.8840 in early European trading on Thursday. Traders tended to wait and see ahead of the Swiss National Bank (SNB) monetary policy meeting on Thursday.

The market expects the SNB to cut its policy rate by 25 basis points to 1.25% at its upcoming meeting. George Moran, European economist at Nomura, said: “….. This is our base case as inflation is within the target range and is expected to remain unchanged, and the SNB believes that current policy is restrictive”. If the SNB does not cut rates, this may provide some support to the Swiss franc (CHF). On the other hand, if the SNB cuts rates, it may weigh on the Swiss franc against the US dollar.

On the US dollar side, Federal Reserve (Fed) officials maintained a cautious stance and will wait and see more inflation data before considering a rate cut. Traders expect the Fed to cut rates once or twice before the end of this year. The CME FedWatch tool showed that the probability of the Fed cutting the funds rate by 25 basis points (bps) in September rose to 67% from 61% a day ago following the weak retail sales data. Investors will get more new momentum from the initial S&P Global Purchasing Managers Index (PMI) in the United States in June. If the above data is stronger than expected, it may boost the US dollar and limit the downside of USD/CHF.

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