Swiss Franc remains under pressure against US Dollar, Fed’s policy in focus

The Swiss Franc (CHF) continues to decline against the US Dollar (USD) on Tuesday, with the USD/CHF pair trading slightly higher at approximately 0.8178 in the Asian session. The US Dollar (USD) is outperforming amid strong expectations of a Federal Reserve (Fed) interest rate hike during the policy meeting on Wednesday. As of press time, the US Dollar Index (DXY), which measures the Greenback's value against six major currencies, has risen by 0.1% to near 99.58.

The Federal Open Market Committee (FOMC) is set to meet for the first rate hike since July 2023, with strategists at Brown Brothers Harriman (BBH) forecasting a 25 basis point increase, bringing the target range to 3.75%-4.00%. BBH argues that persistently high US inflation and a stable labor market justify the rate increase, and Fed funds futures price indicates a 90% probability of a hike this week.

The vote split, updated Summary of Economic Projections (SEP), and Fed Chairman Kevin Warsh's press conference are expected to play a crucial role in guiding market reactions to the Fed's decision. Meanwhile, financial markets anticipate the Swiss National Bank (SNB) to maintain its monetary easing stance and keep interest rates at 0% during the upcoming policy meeting.

Analysts at Nomura believe that Switzerland's policy stance will likely remain unchanged, given low inflation, the current policy rate, and concerns over the costs of entering a negative rate regime. The USD/CHF pair is currently trading at 0.8179 and is supported by the 20-day exponential moving average (EMA) at 0.8111, indicating a constructive bias while the pair consolidates over this dynamic floor.