USD/CHF Remains Firm Near 0.8970 Amidst Shifting Market Sentiment

USD/CHF Remains Firm Near 0.8970 Amidst Shifting Market Sentiment

The USD/CHF pair is holding steady near 0.8970 in the early European session as the US Dollar gains strength following the unwinding of Fed rate-cut expectations. The recent US Nonfarm Payrolls report for May showing strong labor demand and wage growth has dampened dovish sentiments ahead of the Fed’s September meeting.

The shift in market sentiment towards a more risk-averse approach can be seen in the decline of Fed rate-cut bets and losses in S&P 500 futures during the early London session. The US Dollar Index (DXY) has surged to a four-week high near 105.27, while 10-year US Treasury yields continue to climb.

Investors are eagerly awaiting the release of the US Consumer Price Index (CPI) data for May and the Fed’s interest rate decision later in the week. Analysts predict a deceleration in annual core inflation to 3.5% and steady growth in headline figures at 3.4%. The Fed is expected to maintain its current interest rates for the seventh consecutive time, with a possibly hawkish stance on future rate decisions.

In Switzerland, market focus is on the SNB’s rate-cut path and the potential impact on the Swiss Franc. Despite inflation remaining below the 2% threshold, SNB Chairman Thomas J. Jordan has hinted at minimal upside risks to inflation expectations due to the weak Swiss Franc boosting Swiss exports globally.

As market sentiment shifts towards a more risk-averse tone, the USD/CHF pair remains stable near 0.8970. Investors are closely monitoring upcoming events such as the US CPI data release and the Fed’s interest rate decision for further clarity on market direction. The SNB’s cautious approach to future rate cuts adds to the uncertainty surrounding the Swiss Franc’s movement.

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