USD/CHF holds position around 0.8500 ahead of SNB interest rate decision

USD/CHF may gain ground as the SNB is widely expected to deliver a 25 basis point rate cut on Thursday.
Market participants estimate a 63% chance of a quarter-percentage-point cut by the SNB.
CME FedWatch Tool suggests around a 50% chance of totaling 75 basis points rate cuts by the Fed in 2024.

Akhtar Faruqui FXStreet

USD/CHF hovers around 0.8500 during the Asian session on Thursday, maintaining its position following recent gains from Wednesday. The Swiss Franc (CHF) may receive downward pressure ahead of the Swiss National Bank’s (SNB) interest rate decision scheduled later in the day.

The Swiss National Bank is widely expected to deliver a 25 basis point interest rate cut at its upcoming September meeting. Interest Rate Probabilities suggest that market participants estimate a 63% chance of a quarter-percentage-point cut by the SNB, while for a larger one, the chances are at 37%.

On Wednesday, the ZEW Swiss Survey Expectations fell by 5.4 points from the previous month, registering a reading of -8.8 in September, down from a previous reading of -3.4. UBS, which partners with the CFA Society Switzerland to publish the indicator, noted that the negative reading indicates increasing pessimism among participants about the growth outlook for the Swiss economy over the next six months.

The upside of the USD/CHF pair could be limited due to the subdued US Dollar (USD). The Greenback receives downward pressure from rising odds of further interest rate cuts by the US Federal Reserve (Fed) in upcoming policy meetings. According to the CME FedWatch Tool, markets are pricing in around a 50% chance of totaling 75 basis points to be deducted by the Fed to a range of 4.0-4.25% by the end of this year.

Federal Reserve Governor Adriana Kugler said on Wednesday that she “strongly supported” the Fed’s decision to cut the interest rates by a half point last week. Kugler further stated that it will be appropriate to make additional rate cuts if inflation continues to ease as expected, per Bloomberg.

Traders will likely observe the release of the final US Gross Domestic Product (GDP) Annualized for the second quarter (Q2) scheduled to be released later in the North American session.

Economic Indicator

SNB Interest Rate Decision

The Swiss National Bank (SNB) announces its interest rate decision after each of the Bank’s four scheduled annual meetings, one per quarter. Generally, if the SNB is hawkish about the inflation outlook of the economy and raises interest rates, it is bullish for the Swiss Franc (CHF). Likewise, if the SNB has a dovish view on the economy and keeps interest rates unchanged, or cuts them, it is usually bearish for CHF.

EUR/USD looks weak below 1.1800

EUR/USD has slipped back under pressure, breaking through the 1.1800 support and drifting towards the weekly lows near 1.1770 ahead of the opening bell in Asia. The move reflects renewed strength in the US Dollar, with steady geopolitical tensions keeping its demand firm. Moving forward, the release of the German labour market report and flash inflation figures should keep European investors entertained on Friday.

GBP/USD threatens the 200-day SMA near 1.3440

GBP/USD rapidly leaves behind Wednesday’s strong advance, coming under heavy pressure and retesting the 1.3440 zone, where the critical 200-day SMA is located. Cable’s deep pullback follows the strong gains in the Greenback, while investors continue to pencil in a potential BoE rate cut in March.

Gold trims gains, slips back to around $5,170

Gold is now facing some downside pressure, hovering around the $5,170 region on Thursday. The yellow metal surrenders part of its earlier gains on the back of the resurgence of the buying interest in the Greenback. In the meantime, geopolitical tensions in the Middle East continue to limit the downside potential for now.