USD/CHF Holds Steady as Fed Rate-Cut Speculation Grows

The USD/CHF currency pair remained steady around 0.8050 on Thursday, November 22, 2023, as expectations for a Federal Reserve interest rate cut continued to put pressure on the US Dollar. Market sentiment currently assigns an 85% probability for a 25-basis-point cut at the upcoming December meeting, influencing trading behavior.

Investors are closely monitoring jobless claims data as the broader labor market shows signs of softening. Initial Jobless Claims for the week ending November 22 rose to 216,000, lower than the anticipated 225,000, indicating some resilience in the labor market. Meanwhile, Continuing Claims increased slightly from 1.95 million to 1.96 million, suggesting a gradual cooling trend that markets have already begun to factor in.

Market Conditions and US Dollar Performance

The US Dollar Index remained stable near 99.57, failing to capitalize on the stronger job data, largely due to thin market liquidity attributed to the Thanksgiving holiday in the United States. This environment has limited volatility across US assets and reinforced trends driven by policy expectations, particularly regarding the Federal Reserve’s future actions.

Despite positive reports, such as stronger-than-expected Durable Goods Orders released earlier in the week, market sentiment remains largely bearish towards the US Dollar. Speculation is also growing that Kevin Hassett, who is perceived as dovish, may succeed Jerome Powell as Federal Reserve Chair when Powell’s term concludes in May 2024. This potential shift could further impact monetary policy direction.

In contrast, the Swiss National Bank is expected to maintain its policy rate at 0.00% potentially through 2027, reinforcing the divergence in monetary policy between the US and Switzerland. This outlook supports ongoing downward pressure on the USD/CHF exchange rate.

Upcoming Swiss Economic Data

Traders are awaiting key economic data releases from Switzerland, including the third-quarter Gross Domestic Product (GDP) figures and the KOF Leading Indicator, scheduled for Friday. These reports are anticipated to provide further insights into Switzerland’s economic trajectory and could influence the currency market.

As the USD/CHF pair navigates through an environment characterized by Fed rate-cut expectations, it remains under pressure, highlighting the challenges facing the US Dollar amid evolving economic indicators. The anticipated Swiss data releases could play a crucial role in shaping market dynamics in the coming days.