Swiss Franc Surges as Weaker US Data and Reduced Rate Hike Odds Boost CHF
The Swiss Franc (CHF) gained strength against the US Dollar (USD) on Wednesday, as the USD/CHF pair dropped by nearly 0.18% to trade around 0.8078.
This weakness in the Greenback came after a series of weaker-than-expected US economic reports reinforced expectations that the Federal Reserve may adopt a less aggressive policy stance.
The ADP Employment Change report showed that the private sector added only 44,000 jobs in July, well below the market expectation of 70,000 and slowing from 98,000 in June. The ISM Services Purchasing Managers Index (PMI) also edged up slightly to 54.1 from 54.0, but still missed analysts' forecast of 54.5.
The reduced inflation concerns due to lower crude oil prices supported expectations that major central banks may have less need to tighten monetary policy. As a result, market participants reduced their expectations for further Federal Reserve interest rate increases, with the probability of a September rate hike declining to around 56% compared to 67% a day earlier.
The uncertainty surrounding the potential reopening of the Strait of Hormuz remains, however, as any agreement between Iran and Oman would not automatically reopen the waterway. The Swiss National Bank (SNB) is expected to maintain its policy rate at 0%, given the subdued inflation in Switzerland.