- USD/CHF trades lower around 0.8830 due to the retreating US Treasury yields.
- US Dollar (USD) weakens despite the Fed’s hawkish stance at the Jackson Hole Symposium.
- Fed Chair Jerome Powell endorsed the idea of maintaining “higher for longer” interest rates.
USD/CHF trades lower around the 0.8830 level at the start of the week. Indeed, USD/CHF lost momentum after hitting a weekly high at 0.8876 on Friday amid the pullback in United States (US) Treasury yields. Additionally, the pair experiences pressure due to the upbeat Swiss Employment Level (Q2) data, which improved to 5.432M, slightly higher than the expectations of 5.428M, from the previous reading of 5.389M.
The US Dollar Index (DXY), which measures the performance of the Greenback against the six major currencies, trades lower around 104.10 despite the hawkish remarks by the US Federal Reserve (Fed) at the Jackson Hole Symposium, reinforcing a cautious market sentiment as traders look for additional indication regarding the monetary policy stand.
Fed Chairman Jerome Powell advocated for supporting “higher for longer” interest rates. He mentioned that this policy approach has a limiting effect, yet underscored that the Fed cannot conclusively ascertain the precise level of the neutral rate. Powell also highlighted that there is still a substantial amount of progress needed to attain price stability. Given the prevailing economic uncertainty, he underscored the necessity for flexible and agile decision-making in shaping monetary policy.
In addition to this, Philadelphia Fed President Patrick Harker expressed his view that there is no immediate requirement for further interest rate increases. He proposed that the Federal Reserve should maintain its current rate levels and carefully assess the consequences of its policies on the economy. Meanwhile, Cleveland Fed President Loretta Mester noted that both GDP and labor market data indicate a growing momentum in the economy. She stressed that the present rates are not restrictive enough to attain the inflation target.
The Greenback weakened due to the moderate US economic data released during the previous week. US Michigan Consumer Sentiment Index for August, declined to 69.5 figure from the expected 71.2, which was expected to be unchanged. US Durable Goods Orders for July posted a reduction of 5.2% as compared to the market consensus of 4%, swinging from the 4.4% reading in June. However, Initial Jobless Claims indicated favorable employment conditions and increased woes over the US inflation outlook.
The USD/CHF traders are currently focused on the four-day visit of US Commerce Secretary Gina Raimondo to Beijing. The primary objective of this visit is to strengthen business ties between the United States and China. It’s important to highlight that the relationship between these two major global powers is presently strained.
Investors are also expected to keep a close eye on China’s services and manufacturing Purchasing Managers Index (PMIs) later in the week. These indicators will offer additional insights into the economic conditions within the country. If China’s economy continues to weaken, it could potentially bolster the appeal of the safe-haven Swiss Franc (CHF).
Market participants will likely monitor the upcoming announcements of the ZEW Survey, and the Consumer Price Index (YoY). On the US docket, the US Core Personal Consumption Expenditures (PCE) Index, the weekly Jobless Claims, and Nonfarm Payrolls will be due later in the week. These datasets have the potential to offer new insights into the broader economic prospects, aiding traders in gaining a clearer perspective on the USD/CHF pair.