USD/CHF edges higher to near 0.9150 as traders turn toward US Dollar

• USD/CHF gained ground as investors turned toward US Dollar after robust US PMI data.
• Fed’s Raphael Bostic stated that the inflation outlook might not improve as quickly as market expectations.
• Swiss Employment Level (QoQ) came in at 5.484 million in Q1 compared to the previous reading of 5.488 million.

USD/CHF retraces its recent losses that were registered in the previous session, trading around 0.9150 during the European hours on Friday. Traders shifted their focus to the US Dollar (USD) following higher-than-expected Purchasing Managers Index (PMI) data from the United States (US), which dampened risk appetite. The robust data further strengthened the hawkish sentiment surrounding the Federal Reserve (Fed), suggesting the maintenance of higher policy rates for an extended period.

The S&P Global US Composite PMI increased to 54.4 in May, up from 51.3 in April, reaching its highest level since April 2022 and surpassing market expectations of 51.1. The Service PMI surged to 54.8, indicating the most significant output growth in a year, while the Manufacturing PMI rose to 50.9.

Additionally, Federal Reserve Bank of Atlanta President Raphael Bostic stated on Thursday that the inflation outlook might not improve as quickly as market participants are hoping for. According to the CME FedWatch Tool, the probability of the Federal Reserve implementing a 25 basis-point rate cut in September has decreased to 46.6% from 49.4% a day earlier.

In Switzerland, the Employment Level (QoQ) released by the Swiss Statistics indicated that the total number of employed workers stood at 5.484 million in the first quarter, slightly below the previous reading of 5.488 million.

The yield on the 10-year Swiss government bond hovers around 0.76%, suggesting that the Swiss National Bank (SNB) is likely to maintain current interest rates. This could potentially strengthen the CHF and weaken the USD/CHF pair.

Investors have been closely watching for clues on when the Fed will begin cutting interest rates. Meanwhile, the Swiss National Bank unexpectedly lowered interest rates for the first time in nine years in March, reducing the key interest rate by 25 basis points to 1.50%. This move made it the first major central bank to ease its monetary policy.