USD/CHF improves to near 0.8620 as Fed Powell rules out interest rate cut in March

• USD/CHF gains ground after Fed Chair Powell dismissed the possibility of a rate cut in March’s meeting.
• Fed chose to maintain its existing interest rates as expected.
• SNB Jordan anticipated that Swiss inflation would remain below 2.0%.

USD/CHF edges higher to near 0.8620 during the Asian session on Thursday. Despite a setback in the US Dollar (USD) against the Swiss Franc (CHF) on Wednesday due to disappointing US employment data, a recovery ensued after Federal Reserve (Fed) Chair Jerome Powell dismissed the likelihood of a rate cut in the forthcoming March meeting. This decision was widely expected, given the Fed’s choice to uphold the existing interest rates. Powell underscored the enduring presence of heightened inflation and emphasized the strong growth in economic activity.

Furthermore, the Federal Open Market Committee (FOMC) does not anticipate considering a reduction in the target range until it has acquired increased confidence that inflation is progressing consistently toward the 2.0 percent target. Although inflation has moderated over the past year, it is still elevated. The statement omits the reference to additional policy firming.

Swiss National Bank (SNB) Chairman Thomas Jordan addressed at a Business Journalists club on Tuesday. He stated that the expectation is for inflation to rise due to the Value Added Tax (VAT) increase and electricity prices, but it is anticipated to remain below 2.0%. This is the baseline scenario, and the projection for this year suggests that inflation will average below the 2.0% threshold. The consensus expectation is for the Swiss National Bank to implement its first rate cut in September 2024.

Swiss Real Retail Sales (YoY) declined by 0.8% against the expected growth of 0.9% in December. The Swiss consumer demand was fallen by 1.5% in November. Gross Domestic Product (MoM) for November rose to 0.2% from the flat 0.0% prior, exceeding the market consensus of 0.1% growth. Traders will observe the S&P Global Manufacturing PMI and SVME – Purchasing Managers’ Index on Thursday.