USD/CHF weakened after two days of gains, trading around 0.8060 during the Asian session on Monday (August 11th). The currency pair weakened amid increasing likelihood that the Fed will deliver multiple interest rate cuts later this year. US consumer inflation data due Tuesday, followed by preliminary UK Q2 GDP data and the US Producer Price Index (PPI) due Thursday, will be in focus to provide further impetus for the US economy.

The US Dollar Index (DXY), which measures the value of the US dollar (USD) against six major currencies, retraced its recent gains and was trading around 98.00 at the time of writing. The greenback faces challenges as weak US economic data has prompted traders to price in the possibility of further interest rate cuts this year.

Higher Initial Jobless Claims and lower July Nonfarm Payrolls (NFP) data in the United States have raised expectations for a Fed rate cut next month, with a further cut likely in December. The market is currently pricing in an 89% chance of a Fed rate cut at its September meeting, up from 80% a week ago, according to the CME FedWatch tool.

Furthermore, Fed Governor Michelle Bowman stated on Saturday that three rate cuts are likely appropriate this year. St. Louis Fed President Alberto Musalem noted on Friday that US economic activity remains stable but warned of potential risks ahead, noting that the Fed could miss its inflation and employment targets, with particular downside risks to employment.

The downside movement of the USD/CHF pair may be limited as the Swiss Franc (CHF) may weaken due to the potential domestic economic impact of the newly imposed 39% US tariffs. On Friday, the Swiss precious metals association expressed concern over the potential impact of higher tariffs on gold shipments to the United States. Furthermore, the Swiss National Bank (SNB) may push interest rates further into negative territory, as annual inflation in Switzerland rose to 0.2% in July, above the 0.1% forecast but still close to zero. (alg)

Source: FXstreet