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USD/CHF halted a three-day winning streak and traded around 0.8890 in Asian trading on Tuesday. The dollar came under pressure as market expectations for a rate cut by the Federal Reserve (Fed) in September grew. Last week, Fed Chairman Jerome Powell noted that three U.S. inflation data this year “have increased confidence to some extent” that inflation is expected to continue to reach the Fed’s target, which means that rate cuts may be imminent.
In addition, John Williams, president of the Federal Reserve Bank of New York, said on Friday that the long-term trend that led to a lower neutral interest rate before the epidemic remains intact. “My own Holden-Laubach-Williams estimates of neutral interest rates in the U.S., Canada and the eurozone are about where they were before the pandemic,” Williams said, according to Bloomberg.
On Monday, Democrats endorsed Vice President Kamala Harris as the leading candidate for the presidential nomination. Harris has secured the support of a majority of pledged delegates to the Democratic convention, according to NBC News projections. The threshold for securing the nomination is 1,976 delegates, and NBC estimates Harris has secured the support of 1,992 delegates through verbal or written endorsements.
For the Swiss franc, traders expect the Swiss National Bank (SNB) to cut rates further in September, which could put downward pressure on the Swiss franc. Weak inflationary pressures and a strong Swiss franc could prompt the central bank to cut rates.
“I expect the SNB to implement a third rate cut next quarter, and potentially a fourth in December, if there remains strong conviction about the need for restrictive monetary policy,” commented Kyle Chapman, currency market analyst at Ballinger Group.
