Swiss Franc ticks up against US Dollar despite bright Swiss ZEW economic expectations

USD/CHF edges down below 0.8030 from session highs near 0.8040, but remains trapped within Tuesday's range.
The Swiss ZEW Economic Expectations Index improved to a nine-month high in August.
US Dollar volatility remains subdued on Wednesday with all eyes on the US PCE Price Index report.

Guillermo Alcala FXStreet

The Swiss Franc (CHF) is trading lower against the US Dollar (USD) on Wednesday, but it has managed to trim some losses after the release of an upbeat Swiss ZEW Economic Expectations Index. The USD/CHF pair appreciates about 0.2% on the day, but it has edged down to levels below 0.8930, from session highs near 0.8940

Data released by the German ZEW research centre showed that the Swiss Economic Expectations Index improved for the second consecutive month in August, to a 12.1 reading, from 10.0 in July, showing its best performance since November last year.

US Inflation in the spotlight

The main focus on Wednesday, however, is the release of the US Personal Consumption Expenditures (PCE) Price Index, the US Federal Reserve’s (Fed) inflation gauge of choice, which is expected to highlight stubbornly high price pressures and keep pressure on the central bank to hike interest rates in the coming months.

Analysts at ING expect the Dollar to hold broadly stable around the upcoming US core PCE release, arguing that “a benign US core PCE print at 0.2% month-on-month should keep the dollar relatively steady today,” while the calmer backdrop in markets “could see some mild dollar losses.”

Beyond that, Oil prices have dropped about 8% from last week's highs as Iran and Oman push talks to reopen the Strait of Hormuz, which has contributed to lifting market sentiment and adding pressure on the safe-haven USD.

Economic Indicator

ZEW Survey – Expectations

The ZEW Survey Expectations published by the Centre for European Economic Research presents business conditions, employment conditions and other elements affecting the day to day running of a business in Switzerland. Generally speaking, a high reading is seen as positive (or bullish) for the CHF, whereas a low reading is seen as negative (or bearish).

Economic Indicator

Core Personal Consumption Expenditures - Price Index (YoY)

The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures." Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Why it matters to traders?

After publishing the GDP report, the US Bureau of Economic Analysis releases the Personal Consumption Expenditures (PCE) Price Index data alongside the monthly changes in Personal Spending and Personal Income. FOMC policymakers use the annual Core PCE Price Index, which excludes volatile food and energy prices, as their primary gauge of inflation. A stronger-than-expected reading could help the USD outperform its rivals as it would hint at a possible hawkish shift in the Fed’s forward guidance and vice versa.

Author

Guillermo Alcala

FXStreet

Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.

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