USD/CHF trades calmly around 0.7920, SNB’s interest rate policy comes under spotlight

• USD/CHF consolidates around 0.7920 as the US Dollar trades calmly after Fed Powell’s speech.

• Fed Powell signals caution on reducing interest rates further.

• The SNB is expected to hold interest rates at zero level on Thursday.

The USD/CHF pair trades broadly calm around 0.7920 during the late Asian session on Tuesday. The Swiss Franc pair consolidates as the US Dollar (USD) wobbles after Federal Reserve (Fed) Chair Jerome Powell signaled caution on interest rate cuts amid growing risks to the dual mandate.

During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades stably around 97.35.

On Tuesday, Fed Chair Powell stated that the central bank needs to exercise on caution on loosening the monetary policy further as “near-term risks to inflation are tilted to the upside and risks to employment to the downside”.

Contrary to Powell’s comments, Fed Governor Michelle Bowman signaled urgency on interest rate cuts, citing that the central bank is behind the curve on labor market weakness. "It’s a lot easier to support the labor market by lowering the federal funds rate than it is to fix it after it’s broken," Bowman said.

Going forward, investors will focus on the US Durable Goods Orders data for August, which will be released on Thursday. New orders for Durable Goods are expected to have declined again, but at a moderate pace of 0.5%.

Meanwhile, investors await the monetary policy announcement by the Swiss National Bank (SNB) on Thursday. The SNB is expected to hold interest rates steady at zero level as inflation remains significantly lower. Investors would look for cues about whether officials consider pushing interest rates into the negative territory in the near term.

In the second week of this month, SNB Chairman Martin Schlegel states that negative interest rates could have “undesirable side effects for savers and pension funds”.