USD/CHF clings to gains near 0.7930 as US Dollar trades firmly

USD/CHF trades firmly near 0.7930 as the US Dollar holds onto a two-day recovery move.
The Fed signaled two more interest rate cuts in the remainder of the year.
Investors await the SNB’s monetary policy decision on Thursday.

Sagar Dua FXStreet

The USD/CHF pair holds onto a two-day recovery move around 0.7930 during the late Asian trading session on Friday. The Swiss Franc pair exhibits strength as the US Dollar (USD) trades firmly after the monetary policy announcement by the Federal Reserve (Fed), in which it reduced interest rates by 25 basis points (bps) to 4.00%-4.25%.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, clings to gains made in the last two trading days around 97.50 at the time of writing.

Market experts believe that the US Dollar has gained ground after the Fed’s policy announcement, following comments from Chair Jerome Powell that there is no need to cut interest rates quickly. Also, an interest rate reduction by the Fed was widely anticipated.

Meanwhile, the Fed has signaled two more interest rate cuts in the remainder of the year through its dot plot.

On the economic data front, US Initial Jobless Claims for the week ending September 12 have come in at 231K, lower than estimates of 240K and the prior reading of 264K.

In Friday’s session, investors will focus on the speech from San Francisco Fed President Mary Daly, which is scheduled at 18:30 GMT.

On the Swiss Franc (CHF) front, investors await the monetary policy decision by the Swiss National Bank (SNB), which will be announced on Thursday. The volatility in the Swiss Franc would accelerate if the SNB decides to push interest rates into negative territory. The SNB could consider negative interest rates as inflation continues to remain lower.

Economic Indicator

Fed Interest Rate Decision

The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).

GBP/USD clings to 1.3500 amid marginal losses

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EUR/USD alternates gains with losses near 1.1540

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The inflation narrative is still way more important than the employment story

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9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

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