USD/CHF Rises Above 0.8950 On Expectations Of Fed Delay In Rate Cut

USD/CHF continued to rise for the second day in a row, trading around 0.8960 in early European trading on Wednesday. The rise in the exchange rate may be due to the rise in the US dollar (USD) on the expectation that the Federal Reserve (Fed) will delay the interest rate cut. According to the CME FedWatch Tool, investors believe that the probability of the Federal Reserve cutting interest rates in September is 67.7%, compared with 68.5% a day ago.

Reuters quoted Federal Reserve Governor Michelle Bowman as saying that she reiterated her view on Tuesday that keeping the policy rate stable for a period of time may be sufficient to control inflation. Meanwhile, Federal Reserve Governor Lisa Cook said that given the significant progress in inflation and the gradual cooling of the labor market, it would be appropriate to cut interest rates “at some point”, but she remained vague on the timing of easing.

Potential risk aversion also provided support for the US dollar, which may be due to investors’ cautious attitude ahead of the release of key US economic data later this week. Revised U.S. first quarter (Q1) gross domestic product (GDP) is due on Thursday, followed by the personal consumption expenditures (PCE) price index on Friday.

In Switzerland, the Swiss franc is likely to find support as uncertainty over French politics and the rise of far-right parties in the European Parliament elections drive safe-haven flows. The Swiss 10-year bond yield has fallen to 0.56%, the lowest since August 2022.

In addition, ongoing geopolitical tensions in the Middle East and Ukraine could further fuel risk aversion, favoring the safe-haven Swiss franc. Israeli Prime Minister Benjamin Netanyahu said the heaviest phase of the offensive against Hamas in Gaza is nearing an end, according to CNN. Meanwhile, Russia condemned the United States for a “brutal” attack in Crimea that used U.S.-supplied missiles and killed at least four people, including children, and injured 151.

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