USD/CHF near daily lows amid weaker USD, manages to hold above mid-0.8400s

• USD/CHF struggles to hold on to intraday gains at a one-week high amid renewed USD selling.
• Rising US bond yields are capping USD losses and providing support to the pair amid risk-on sentiment.
• SECO estimates that Switzerland’s economic growth in 2024 and 2025 will be considerably below average.

The USD/CHF pair is attracting some sellers following an intraday rise in the 0.8515 area or a one-week high and falling to a new daily low in the first half of the European session on Thursday. Spot prices are currently trading around the 0.8455-0.8460 region, largely unchanged for the day and remaining within a familiar range from earlier this month.

The US dollar (USD) is under renewed selling pressure and is blocking the post-FOMC recovery from the July 2023 low, which in turn is putting some downward pressure on the USD/CHF pair. Meanwhile, the not so rosy outlook from the Federal Reserve (Fed) on Wednesday raised questions about the extent of interest rate cuts going forward and supported some of the greenback. In fact, updated economic projections showed that policymakers do not see inflation returning to the 2% target before 2026.

Adding to that, Fed Chairman Jerome Powell Fed Chairman Jerome Powell said during the post-meeting press conference that the central bank had no intention of returning to an ultra-low rate regime and dashed hopes of a more aggressive policy relaxations. This is seen as a key factor that continues to push US Treasury yields higher and should act as a tailwind for the dollar. Apart from this, a generally positive risk tone could undercut the Swiss Franc (CHF) and help limit the USD/CHF downside.

In addition, Switzerland’s State Secretariat for Economic Affairs (SECO) in its June economic forecasts said the government continues to expect economic growth in 2024 and 2025 to be considerably below average. This, in turn, calls for some caution for bear traders and before positioning for any further downside moves in the USD/CHF pair. Investors are now eagerly awaiting US macro data – weekly initial jobless claims, the Philly Fed manufacturing index and data on existing home sales – for near-term trading opportunities.