Ella 
USD/CHF strengthened to its highest level since May 31 near 0.9040 in early European trading on Tuesday. The strengthening dollar and rising US bond yields provided some support for USD/CHF. Investors are waiting for the speech of Federal Reserve (FED) Chairman Powell on Tuesday for new trading thrust.
Recent US economic data has been weaker than expected. It has triggered market expectations that the Fed will cut interest rates in September and December. The US Manufacturing Purchasing Managers’ Index (PMI) released by the Institute for Supply Management (ISM) on Monday was lower than expected, falling from 48.7 in May to 48.5. The Chicago Mercantile Exchange FedWatch tool showed that traders have raised the probability of the Fed cutting interest rates by 25 basis points (bps) in September from 58.2% last Friday to nearly 59.5%.
However, the Fed’s cautious stance on monetary policy continues to provide support for the US dollar and US Treasury yields. “If inflation remains sticky or slowly declining, interest rates will need to be higher for longer,” San Francisco Fed President Mary Daly stressed on Friday.
In Switzerland, market participants will be closely watching Switzerland’s June consumer price index (CPI) data, which will be released on Thursday. The data may provide some hints on the outlook for the SNB’s rate-cutting cycle at its September meeting. In addition, geopolitical tensions and political uncertainty in the Middle East may boost safe-haven assets such as the Swiss franc (CHF). This may therefore limit the upside for USD/CHF.
