USD/CHF holds above 0.7700 in subdued trade as Fed minutes loom

• USD/CHF trades above 0.7700 but remains confined within its weekly range.
• Trading volumes stay subdued as investors await the Federal Reserve minutes.
• The Swiss Franc remains pressured following softer inflation data in Switzerland.

USD/CHF trades around 0.7717 on Wednesday at the time of writing, up 0.20% on the day. The pair attempts to extend its rebound above the psychological 0.7700 level but continues to move within a narrow range seen since the start of the week, reflecting a lack of strong conviction among market participants.

The current price action unfolds in an environment of thin volumes, as markets focus on the release of the minutes from the latest Federal Reserve (Fed) meeting. At that meeting, the US central bank left its benchmark interest rate unchanged within the 3.5%-3.75% range, signaling a cautious stance toward inflation and economic activity developments. Investors are now looking for further insight into internal discussions within the committee to assess the potential timing of monetary easing.

Market expectations continue to price in the possibility of several rate cuts this year if inflationary pressures keep moderating. Recent comments from Fed officials, including Chicago Fed President Austan Goolsbee, suggest that rate reductions remain on the table but will depend strictly on upcoming macroeconomic data, notably Gross Domestic Product (GDP) and the Personal Consumption Expenditures (PCE) Price Index.

In Switzerland, the economic calendar remains relatively light this week. However, the Swiss Franc (CHF) has stayed on the back foot since the release of the Consumer Price Index (CPI), which showed inflation hovering at the lower end of the Swiss National Bank’s (SNB) target range. This backdrop fuels speculation about a prolonged period of very accommodative monetary conditions, and even the possibility of negative rates returning if warranted.