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USD/CHF
Source: Newsmaker.id
The Swiss franc weakened against the US dollar in trading on Tuesday (September 15), with USD/CHF moving slightly higher to around 0.8178 in the Asian session. The pair's strengthening was supported by the US dollar's continued solid performance ahead of the Federal Reserve's policy decision on Wednesday.
The US Dollar Index (DXY) rose 0.1% to around 99.58. The greenback was supported by strong expectations that the Fed will raise interest rates again at this week's policy meeting.
Brown Brothers Harriman strategists expect the FOMC to end its streak of five rate hold decisions. The Fed is expected to raise rates by 25 basis points to a target range of 3.75%–4.00%, which would be the first hike since July 2023.
These expectations are supported by US inflation remaining above target and a relatively stable labor market. Fed funds futures currently estimate a roughly 90% chance that the Fed will raise interest rates this week.
Market focus is not only on the interest rate decision, but also on the policy statement, vote share, the Summary of Economic Projections update, and the press conference by Fed Chairman Kevin Warsh. Warsh's signals will determine the next direction of the US dollar.
On the Swiss side, the market expects the Swiss National Bank to continue its policy easing path and maintain interest rates at 0% at its meeting later this month. The divergence in policy direction between the Fed and the SNB leaves the Swiss franc vulnerable to pressure.
Newsmaker Analysis: The strengthening of the USD/CHF indicates that the market still prefers the US dollar ahead of the FOMC due to strong expectations of a Fed rate hike. As long as the probability of a rate hike remains around 90%, the dollar has the potential to remain supported. However, the next direction will depend heavily on Kevin Warsh's tone. If the Fed raises rates and remains hawkish, USD/CHF has the potential to continue rising. Conversely, if Warsh sounds cautious, the dollar could lose momentum and open up room for a rebound for the Swiss franc. (asd)