Market Analysis

The USD/CHF pair reverses its two-day decline, stabilizing around 0.8940 in early European trading on Friday. This rebound is supported by a stronger US dollar, buoyed by the Federal Reserve's hawkish outlook, indicating only a single rate cut is anticipated in 2024. Investors are now eyeing the preliminary US Michigan Consumer Sentiment report and a speech by the Fed Bank of Chicago President Austan Goolsbee on Friday for further direction.

On Thursday, the US Producer Price Index (PPI) increased by 2.2% year-over-year in May, slightly down from April's revised figure of 2.3% and below the market forecast of 2.5%. The core PPI also rose by 2.3% year-over-year in May, falling short of both the expected and previous 2.4%. Despite these weaker economic indicators, the Fed's hawkish stance has bolstered the Greenback, limiting the pair's downside.

The Fed's dot plot revealed that it plans to reduce its key interest rate by just 25 basis points towards the end of 2024. This projection follows the Fed's decision to maintain interest rates at their highest level in 23 years, even as inflation showed signs of easing.

In Switzerland, the Federal Statistical Office reported on Thursday that Producer and Import Prices fell by 0.3% month-over-month in May, compared to a 0.6% increase in April, and below the anticipated 0.5% rise. Additionally, markets expect the Swiss National Bank (SNB) to keep interest rates steady in June, potentially strengthening the Swiss Franc (CHF). Furthermore, ongoing geopolitical tensions in the Middle East may enhance the CHF's appeal as a safe-haven asset.

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Paraphrasing text from "FX Street" all rights reserved by the original author.