USD/CHF aims to revisit 0.8950 as SNB to cut rates further

Finance

USD/CHF aims to revisit 0.8950 as SNB to cut rates further

• USD/CHF strives to reclaim an almost five-month high of 0.8960 amid weakness in the Swiss Franc (CHF).
• The SNB unexpectedly cuts its interest rates by 50 bps to 0.5% on Thursday.
• Investors expect the Fed to reduce its key borrowing rates by 25 bps on Wednesday.

The USD/CHF pair aims to revisit a five-month high of 0.8960 in Fridays North American session. The Swiss Franc pair ticks higher as the outlook of the Swiss currency has weakened across the board after the Swiss National Bank (SNB) surprisingly reduced its key borrowing rates by 50 basis points (bps) to 0.5% on Thursday.

Market participants anticipated the SNB cutting interest rates by 25 bps as the central bank remained worried about the risks of inflation undershooting the banks target and growing concerns over the global markets due to potential tariffs by United States (US) President-elect Donald Trump.

After a larger-than-usual interest rate cut decision, SNB Chairman Martin Schlegel commented, “With our easing of monetary policy today we are countering the lower inflationary pressure.” On the interest rate outlook, Schlegel said, “We will continue to monitor the situation closely, and will adjust our monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.”

Meanwhile, the US Dollar (USD) surrenders its intraday gains and turns negative as the Federal Reserve (Fed) is widely anticipated to cut its key borrowing rates by 25 bps to 4.25%-4.50% in the policy meeting on Wednesday. The US Dollar Index (DXY), which tracks the Greenbacks value against six major currencies, falls back to near 106.75 after facing selling pressure above 107.00.

Though the Fed is certain to cut interest rates next week, it is expected to pause the policy-easing cycle in January as progress in disinflation appears to have stalled. According to the CME FedWatch tool, there is a 77% chance that the Fed will leave interest rates unchanged next month.