USD/CHF is trading lower near 0.8045 in early European hours on Tuesday, pressured by growing expectations that the US Federal Reserve (Fed) will cut interest rates at its December meeting. The dovish shift continues to weigh on the US Dollar (USD) against the Swiss Franc (CHF) as traders prepare for key macro releases, including Wednesday’s Swiss CPI report and the US ADP Employment Change and ISM Services PMI data.
Fed cut expectations drag the greenback
Soft US economic data and dovish commentary from Fed officials have reinforced bets on a near-term easing cycle. Markets are now pricing in almost an 85% probability of a 25-basis-point rate cut this month, according to the CME FedWatch Tool.
Adding to the pressure, reports suggest White House economic adviser Kevin Hassett is the leading candidate to become the next Fed chair. Hassett is viewed as supportive of former President Donald Trump’s call for faster and deeper rate cuts to stimulate economic activity—a perception that further undermines the USD.
Weak Swiss GDP tempers CHF strength
Swiss GDP contracted by 0.5% QoQ in Q3, a sharp reversal from the revised 0.2% expansion in Q2 and worse than the expected -0.4%. The weaker-than-forecast reading from SECO could limit additional CHF appreciation and help stabilize USD/CHF in the near term, even as US rate-cut expectations dominate market sentiment.
With important inflation data due from Switzerland and fresh US employment and services-sector indicators on deck, traders may remain cautious ahead of the next catalyst for direction.
