USD/CHF slumps to near 0.7900 as Fed dovish bets weigh on US Dollar
- USD/CHF falls sharply to near 0.7910 as the US Dollar underperforms amid firm Fed dovish bets.
- The Fed is widely anticipated to cut interest rates on Wednesday.
- Inflation in the Swiss economy at the producer level has declined again.
The USD/CHF pair falls sharply to near 0.7915 during the European trading session on Tuesday. The Swiss Franc pair faces selling pressure as the US Dollar (USD) underperforms its peers amid firm expectations that the Federal Reserve (Fed) will cut interest rates in the monetary policy announcement on Wednesday.
At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, posts a fresh seven-week low near 97.00.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.33% | -0.27% | -0.26% | -0.06% | -0.01% | 0.00% | -0.33% | |
| EUR | 0.33% | 0.07% | -0.03% | 0.26% | 0.38% | 0.33% | 0.00% | |
| GBP | 0.27% | -0.07% | -0.06% | 0.19% | 0.31% | 0.26% | -0.09% | |
| JPY | 0.26% | 0.03% | 0.06% | 0.26% | 0.32% | 0.09% | -0.03% | |
| CAD | 0.06% | -0.26% | -0.19% | -0.26% | 0.05% | 0.03% | -0.27% | |
| AUD | 0.00% | -0.38% | -0.31% | -0.32% | -0.05% | 0.03% | -0.37% | |
| NZD | -0.01% | -0.33% | -0.26% | -0.09% | -0.03% | -0.03% | -0.29% | |
| CHF | 0.33% | -0.00% | 0.09% | 0.03% | 0.27% | 0.37% | 0.29% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
According to the CME FedWatch tool, there is a 96% chance that the Fed will reduce interest rates by 25 basis points (bps) to 4.00%-4.25%, while the rest support a bigger reduction of 50 bps.
Fed dovish expectations have been boosted by slowing United States (US) benchmark revision report for 12 months ending August showed that 919k fewer jobs were created than what had been anticipated earlier.
Meanwhile, a majority of Fed officials, including Chair Jerome Powell, have also warned of downside labor market risks in the wake of tariffs imposed by President Donald Trump.
In the Swiss economy, Producer and Import Prices for August have declined again. Inflation at the producer level dropped at a pace of 0.6%, faster than the prior reading of 0.2%. Economists expected the producer inflation to have grown by 0.1%. Signs of producers lowering prices to cope up with weak demand are likely to force Swiss National Bank (SNB) to consider pushing interest rates into the negative territory.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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