The USD/CHF Exchange Rate Hovers Near a Multi-Week Low, Below 0.90, As The USD Struggles To Acquire Traction

The USD/CHF pair consolidates its recent decline to a nearly three-week low reached during Friday's Asian session and oscillates in a narrow trading range below the psychological 0.9000 threshold.

The US Dollar (USD) is near its lowest level since May 24 as a result of Thursday's disappointing macroeconomic data from the United States, which functions as a headwind for the USD/CHF pair. Thursday, the US Department of Labor (DOL) reported that the number of Americans filing new claims for unemployment benefits reached a 20-month high, exceeding expectations. This, in turn, reinforces market expectations that the Federal Reserve (Fed) will pause rate increases, which led to a drop in US Treasury bond yields overnight and continues to weigh on the Greenback.

However, the markets continue to price in the possibility of another 25 basis point Fed rate increase in July. This week's unexpected rate increases by the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) boosted wagers, suggesting that the fight against inflation is not yet over and bolstering expectations for additional Fed policy tightening. This in turn prevents traders from placing aggressive adverse wagers on the USD. Aside from this, a modest improvement in global risk sentiment is observed to be undermining the safe-haven Swiss Franc (CHF) and bolstering the USD/CHF exchange rate.

In the wake of concerns about a global economic downturn, which could stifle any optimism, any meaningful upside for the major appears elusive. In fact, the Organization for Economic Co-operation and Development (OECD) predicts that the global economy will experience a sluggish recovery over the next few years due to persistent core inflation and tighter monetary policy, both of which impact on demand. The OECD now anticipates that the global economy will expand by 2.7% this year, which would be the lowest annual growth rate since the 2008-2009 financial crisis, excluding the pandemic-affected year of 2020.

Prior to next week's release of the most recent US consumer inflation data and the highly anticipated FOMC monetary policy meeting, investors may opt to remain on the sidelines. In the interim, in the absence of market-moving economic data from the United States, US bond yields will have a significant impact on the USD exchange rate. Traders will continue to take cues from the broader risk sentiment in order to seize opportunities in the short term. In spite of this, the USD/CHF pair remains on course to record heavy weekly losses for the first time in the previous five weeks.