Market Analysis

USDCHF Trades with Slight Bearish Tone above 0.9000 Prior to Release of US PMI Data

Amos Simanungkalit · 01 Apr 20241.5K Views

The USD/CHF pair is trading slightly lower around 0.9015 in the early European session on Monday. This decline comes in the wake of dovish remarks from Federal Reserve Chairman Jerome Powell on Friday, which have weighed on the US Dollar (USD) and constrained the upside potential of the USD/CHF pair.

Investors are now focusing on the release of the US March ISM Manufacturing Purchasing Managers Index (PMI) later today. Trading activity is expected to remain subdued due to the Easter Monday bank holiday in Switzerland.

Inflation data for February met market expectations, potentially delaying any interest rate cuts by the Federal Reserve this year. Market projections align with Fed estimates, indicating expectations for three rate cuts, as suggested by the CME Group’s FedWatch Tool.

Recent figures from the US Bureau of Economic Analysis revealed that the Personal Consumption Expenditures Price Index (PCE) rose 2.5% year-on-year in February, in line with market consensus.

However, the monthly PCE figure increased by only 0.4% month-on-month, falling short of expectations. Core PCE, the Fed’s preferred inflation gauge, also rose by 2.8% year-on-year and 0.3% month-on-month in February, matching market estimates.

On the Swiss front, the Swiss National Bank (SNB) opted to lower the benchmark interest rate by 25 basis points to 1.5% on March 21. The decision was driven by the effective containment of inflation over the past two and a half years.

Analysts at ING anticipate two more rate cuts from the SNB this year unless there is a significant shift in the international economic landscape that could lead to a rapid increase in inflationary pressures.

Thursday will see the release of the Swiss Consumer Price Index for March, which is anticipated to show a 1.4% increase. Any softening in the Swiss CPI inflation data could exert downward pressure on the Swiss Franc (CHF). Additionally, market attention will turn to US employment data on Friday, including the Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings for March.