Ella 
In early trading in Asia on Wednesday, USD/CHF was consolidating in the 0.8970-0.8980 range. Meanwhile, the U.S. dollar index (DXY), which measures the greenback’s value against six other major currencies, held above 105.10 after pulling back from a six-month high of 105.40 last week. Markets turned cautious ahead of the Federal Reserve’s (Fed) interest rate decision on Wednesday. USD/CHF is currently trading around 0.8976, down 0.01% on the day.
The Federal Reserve (Fed) will announce a two-day monetary policy meeting on Wednesday, and the market is generally expected to maintain interest rates in a range of 5.25% to 5.5%. The CME FedWatch tool shows a 99% chance that the Fed will keep rates on hold. However, the market remains cautious about the Fed’s outlook as inflation data has picked up recently and the U.S. economy remains resilient, which could pave the way for the Fed to raise interest rates further.
In terms of data, the U.S. housing industry data in August was mixed. Data released by the U.S. Census Bureau on Tuesday showed that building permits in the United States increased to 1.543 million households in August, higher than expected and the previous value, while housing starts fell slightly to 1.283 million households.
Switzerland’s trade surplus rose to $4.054 billion in August from $3.132 billion the previous month, data from the Swiss Federal Customs Administration showed on Tuesday. At the same time, exports increased to 20.735 billion in August from 20.713 billion in the previous month. Imports rose to 17.603 billion from 17.584 billion in the previous month.
The Swiss National Bank (SNB) is expected to raise interest rates by a further 25 basis points (bps) on Thursday, from 1.75% to 2%. The SNB is expected to maintain its restrictive stance to ensure price stability as the latest national inflation rate showed inflation at an annual rate of 1.6%, still below the 2% target. However, the monetary policy divergence between the US and Switzerland could continue to push the pair higher if the SNB signals that this is the last rate hike.
Next, market participants will be closely watching the Federal Reserve interest rate decision on Wednesday, followed by the Swiss National Bank meeting on Thursday. These events can trigger market volatility and provide direction for the USD/CHF pair.
