USD/CHF rose slightly to around 0.7940 during Wednesday’s late Asian session, as the US Dollar strengthened ahead of the Federal Reserve’s policy announcement scheduled for 18:00 GMT.
The US Dollar Index (DXY) traded 0.16% higher near 98.85, reflecting cautious optimism that the Fed will implement a 25-bps rate cut, bringing the Federal Funds rate down to 3.75%-4.00%. Market expectations are fueled by slowing US inflation, a softening labor market, and the ongoing federal shutdown. Futures markets also indicate that traders have priced in another 25-bps cut in December.
Investors will closely monitor the Fed’s interest rate outlook and commentary on the labor market, as there are no major US economic data releases this week.
Globally, markets are also focused on the upcoming Trump-Xi meeting in South Korea on Thursday, where both leaders are expected to discuss fentanyl tariffs, rare earth exports, and TikTok-related issues.
In Switzerland, traders await the ZEW Survey Expectations for October at 09:00 GMT. Sentiment improved in September to -46.4 from -53.8 in August.
US Dollar Insights:
- The USD is the world’s most traded currency, accounting for over 88% of global FX turnover.
- Fed decisions are the primary driver of the USD, with interest rate changes influencing currency value.
- Quantitative Easing (QE) weakens the USD by injecting liquidity into the system.
- Quantitative Tightening (QT) strengthens the USD by reducing bond reinvestments and liquidity.
