USD/CHF Holds Steady as Fed Rate-Cut Expectations Mount

The USD/CHF currency pair remained steady at approximately 0.8050 on Thursday, November 22, 2023, as expectations for a rate cut by the Federal Reserve continue to influence the market. With an estimated 85% chance of a 25-basis-point cut during the Fed’s upcoming December meeting, the US Dollar is experiencing downward pressure.

Despite a resilient labor market reflected in the initial jobless claims, which rose to 216,000, slightly below the anticipated 225,000, broader labor market indicators are showing signs of gradual softening. Continuing claims also saw a minor increase from 1.95 million to 1.96 million, suggesting a cooling trend already priced into the market. This mixed data has not significantly altered the prevailing sentiment regarding the Federal Reserve’s monetary policy.

Market Conditions and Liquidity Factors

Market liquidity was notably thin on Thursday due to the Thanksgiving holiday in the United States, which limited volatility across US assets. As a result, the US Dollar Index maintained a steady position near 99.57, failing to capitalize on the stronger-than-expected data. Analysts predict that the Swiss National Bank will likely keep its policy rate at 0.00% until at least 2027, reinforcing the divergence in monetary policy that weighs on the USD/CHF pair.

Traders are looking ahead to key economic data releases from Switzerland, specifically the third-quarter Gross Domestic Product (GDP) and the KOF Leading Indicator, both scheduled for release on Friday. These figures are expected to provide further insight into the Swiss economy’s trajectory and could influence the positioning of the USD/CHF pair.

While the USD/CHF has remained relatively stable, the overall environment is unfavorable for the US Dollar, largely driven by expectations surrounding the Federal Reserve’s policy moves. The potential appointment of Kevin Hassett, perceived as dovish, as the next Fed Chair after Jerome Powell’s term ends in May 2024, further complicates the outlook for the US Dollar.

Current Currency Landscape

In the broader currency landscape, the US Dollar displayed mixed performance against other major currencies on the same day, with notable stability against the Swiss Franc. The following highlights illustrate the percentage changes of the US Dollar against selected currencies:

USD: -0.00% (CHF), -0.01% (EUR), -0.06% (GBP), -0.08% (JPY), -0.20% (CAD), -0.52% (AUD), +0.05% (NZD)

With the anticipation of additional data releases and ongoing speculation regarding the Federal Reserve’s monetary policy, the USD/CHF pair will likely continue to experience fluctuations influenced by both US and Swiss economic indicators. Until the release of these key figures, the pair is expected to trade within a structurally challenging environment for the US Dollar.