The USD/CHF pair is extending its decline, edging closer to the 0.8000 mark during Thursday’s Asian session, as concerns surrounding the Federal Reserve’s (Fed) independence continue to weigh on the US Dollar (USD). With uncertainty surrounding the Fed’s policies, traders are focused on key economic data releases later in the day, including GDP reports from both Switzerland and the US.
On Monday, US President Donald Trump made waves by announcing the removal of Fed Governor Lisa Cook, marking the first time in the Fed’s 111-year history that a president has fired a sitting governor. Trump’s actions have raised doubts about the Fed’s independence, creating additional volatility in the markets. Trump’s move to gain more control over the Fed has intensified concerns about the future direction of US monetary policy, further pressuring the USD.
Traders are now pricing in a possible interest rate cut by the Fed next month, particularly after New York Fed President John Williams signaled the potential for a rate reduction. On Wednesday, Williams remarked that the central bank could lower interest rates if upcoming data supports such a move, increasing market speculation that a Fed rate cut could be on the horizon for September. This dovish stance from Fed officials is contributing to the weakening of the USD.
Looking ahead, market participants are closely watching the GDP figures for Switzerland and the US, with Switzerland’s GDP expected to show a modest 0.1% quarter-over-quarter (QoQ) growth and a 1.4% year-over-year (YoY) increase for Q2. A weaker-than-expected Swiss economic report could offer some support for the USD/CHF pair, potentially limiting its further losses.
In conclusion, USD/CHF remains vulnerable as market participants react to political developments and Fed policy uncertainty, with upcoming economic data playing a pivotal role in shaping the pair’s short-term trajectory. Traders will be looking to the GDP figures for further clues on whether the USD can recover or if the Swiss Franc will maintain its strength in the face of potential policy shifts in the US.
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