We have seen a weakening of CHF to USD, with USD/CHF making a break above 0.90 this week, which is the highest price since the middle of November last year. Fundamentals are shifting in favour of the USD recently, as markets expect fewer rate cuts from the FED, while the SNB already delivered a surprise cut last week and traders have increased expectations for further cuts ahead.

USD/CHF Weekly Chart – The 50 SMA Is Broken

Looking at the weekly chart, USD/CHF has been on a declining trend since October 2022, with moving averages acting as resistance. The last occasion took place in October last year, with the 50 SMA (yellow) rejecting the price twice and acting as resistance after a retrace higher since July. The price fell below 0.84 by December this year as markets were expecting the FED to embark on a rate cut hiatus this year.

But, the FED is still holding on, while the SNB has already started to lower interest rates, with a surprise cut last week. USD/CHF was already on an uptrend since the beginning of the year, but was finding it hard to push above the 50 SMA. The SNB decision turned the Swiss Franc softer while the USD was stronger after the FOMC meeting, which sent this forex pair above the 50 SMA. This week buyers are continuing to push higher and we’re above the 0.90 milestone.

Lower Swiss Inflation and SNB Interest Rates

The Swiss National Bank surprised analysts by reducing borrowing costs by 25 basis points, contrary to expectations of no change from the current 1.75% rate. In its accompanying statement, the central bank cited continuous low inflation as the primary reason for the rate cut. The most recent Switzerland Consumer Price Index (CPI) inflation figures showed weakness despite the headline measure meeting estimates modestly. However, the Core CPI measure experienced a more significant decline.

Projections for the consumer price index were revised down by the SNB, from 1.9% to 1.4% by the end of next year. This move by the Swiss National Bank reflects its commitment to addressing persistently low inflationary pressures and stimulating economic growth, which means that they will remain dovish and deliver more rate cuts during 2024. In response, investors are now anticipating at least two additional interest rate decreases by the end of the year, as the central bank aims to support the economy amid challenging economic conditions.

However, this week markets are concentrated on the upcoming release of the February US core Personal Consumption Expenditure price index (PCE) on Friday, which is expected to have a notable impact on the trajectory of the US dollar. The PCE index is a key measure of inflation closely monitored by the Federal Reserve, so any surprises in the numbers could influence market expectations regarding future monetary policy decisions.

USD/CHF Live Chart