USD/CHF renews weekly low near 0.8430 ahead of Fed policy announcement

• USD/CHF slips to near 0.8430 as traders’ big bets on big Fed rate cuts weigh on the US dollar.
• The Fed is poised to issue its first rate cut decision in more than four years.
• Investors expect the SNB to cut interest rates further at its policy meeting later this month.

The USD/CHF pair is making a new weekly low near 0.8430 in the European session on Wednesday. Swiss franc asset weakens as US dollar (USD) falls back after a short-lived pullback. The US Dollar Index (DXY), which tracks the greenback against six major currencies, is down to near 100.70.

The greenback faces selling pressure ahead of the Federal Reserve’s (Fed) monetary policy announcement at 18:00 GMT, where the central bank is expected to cut interest rates. This would be the Fed’s first dovish decision in more than four years. However, investors will pay close attention to the size of the rate cut and the Fed’s dot chart, which shows where policymakers think Federal Funds rates are headed in the short and long term.

Market participants are curious about the likely interest rate cut by the Fed to understand how bad the current health of the labor market is due to the prolonged maintenance of tight monetary policy. According to the CME FedWatch tool, the likelihood that the Fed will cut interest rates by 50 basis points (bps) to 4.75%-5.00% rose to 63% from 14% a week ago.

Ahead of the Fed’s policy decision, investors’ risk appetite is high. S&P 500 futures posted decent gains in European trading hours.

Meanwhile, the Swiss franc (CHF) is performing strongly against the US dollar, despite growing speculation that the Swiss National Bank (SNB) will extend its monetary policy easing cycle from September. The SNB is expected to offer a third consecutive interest rate cut as Swiss inflation eased significantly. Switzerland’s annual consumer price index (CPI) fell to 1.1% in August, the lowest level since March this year.