This is why the US dollar is weakening against the Swiss franc | 17.09.24

The dollar has weakened slightly again against the Swiss franc and is currently trading at 0.8442 francs. The greenback also fell slightly against the euro (EUR/USD: 1.1126). The EUR/CHF duo is currently trading at 0.9392.

The dollar has been weakening again since the end of last week. The reason is changing expectations of the US Federal Reserve. The majority of the market is now expecting a sharp interest rate cut of 50 basis points. The “Fed Watch Tool” of the options exchange CME now shows a probability of almost 70 percent for such a step, compared to 14 percent at the beginning of the previous week.

Advertisement

Such interest rate developments naturally weaken the dollar. And this may not only be in the short term, as analysts at Commerzbank believe. “A 50 basis point move tomorrow would probably give many market participants the impression that the Fed is not treating the risks symmetrically, but is giving greater weight to real economic risks and deflation risks than to inflation risks,” says one commentary.

“In dubio pro rate cut” would be the motto in this case. And that would not only be relevant for the current interest rate, but according to the analysts it would increase the risk that in the future the Fed would be more likely to lower interest rates if in doubt, the commentary continues.

In any case, history has shown that the Fed is usually more aggressive in interest rate cut cycles than most other central banks. Such phases therefore tend to be USD-negative.

awp-robot/rw/ra

Zurich (awp)