

Market Analysis
The USD/CHF pair continues its rally, reaching near 0.8870 during the early European session on Tuesday. The stronger US Dollar (USD) is broadly supporting the pair. However, market sentiment might turn cautious ahead of the US Federal Reserve's (Fed) Interest Rate Decision on Wednesday.
The Federal Reserve is set to hold monetary policy meetings this week, with no rate changes expected. However, markets widely anticipate the Fed will begin easing its policy at its next meeting in September. With inflation easing faster than expected in June, markets have priced in nearly 64% odds that the Fed will cut rates three times this year—in September, November, and December—according to the CME FedWatch.
"At this point, a modest cut of 25 basis points in September seems likely. If that proceeds smoothly, we could see two additional 25 basis point cuts before the end of 2024," said Jacob Channel, chief economist at LendingTree. Traders will look for further guidance from Fed Chair Jerome Powell during the press conference regarding the interest rate outlook. Should Fed officials deliver dovish comments, this could weaken the Greenback and limit the upside for the pair.
On the Swiss front, uncertainty over the trajectory of the U.S. presidential race, fears of a Chinese economic slowdown, and ongoing geopolitical tensions in the Middle East might increase safe-haven flows, benefiting the Swiss Franc (CHF). Looking ahead, the Swiss KOF Leading Indicator for July is due on Tuesday. On Friday, Switzerland’s Consumer Price Index (CPI) will be released, projected to show a 1.3% year-on-year increase in June.
Traders might remain cautious about betting on a stronger CHF as long as the Swiss National Bank (SNB) does not change its rate direction. A further rate cut in September is now priced at nearly 90%, compared with around 37% just two weeks ago.
Paraphrasing text from "FX Street" all rights reserved by the original author.