USD/CHF loses momentum below the 0.8990 mark, focus on Fed, Swiss rate decision

• USD/CHF loses ground near 0.8968, down 0.09% ahead of the key events.
• The market anticipates that the Federal Reserve (Fed) will keep interest rates unchanged at its September policy meeting.
• The Fed interest rate decision, the SNB meeting will be closely watched events this week.

The USD/CHF pair snaps its three-day winning streak during the early European session on Monday. Meanwhile, the US Dollar Index (DXY) hovers around 105.25 after retreating from a nine-month high of 105.40. The pair currently trades near 0.8966, losing 0.11% on the day. Market players await the key interest rate decision from the Federal Reserve (Fed) and the Swiss National Bank (SNB) on Wednesday and Thursday, respectively.

The market anticipates that the Fed will keep interest rates unchanged at its September policy meeting, but remain one more rate rise on the table. Fed Chairman Jerome Powell will hold a press conference later in the day, but no significant changes are anticipated from the Fed. A dovish stance from officials, on the other hand, may cause a decline in the US Dollar (USD), acting as a headwind for the USD/CHF pair. According to the CME Fedwatch tool, the markets have priced in the Fed's decision not to raise rates in September, while the chances of a 25 basis point (bps) increase at the November meeting have dropped to 27%.

The Federal Reserve Bank of New York reported on Friday that the Empire State Manufacturing Index rose to 1.9 in August, up from -19 in the previous reading, above the market consensus of a 10 drop. Furthermore, Industrial Production increased by 0.4% MoM from 1% in July, exceeding market forecasts. According to the University of Michigan, the preliminary Consumer Sentiment Index for September decreased from 69.1 to 67.7. Finally, the five-year Consumer Inflation Expectation fell from 3% to 2.7%.

The Swiss Consumer Price Index (CPI) grew by 0.2% in August 2023 as compared to the previous month. However, yearly inflation increased by 1.6% from the previous reading, falling short of the Swiss National Bank's (SNB) goal maximum rate of 2.0%. The SNB is expected to raise interest rates again on Thursday. Market players anticipate the SNB to hike its interest rate from 1.75% to 2%.

Looking ahead, market participants will keep an eye on the Swiss Trade Balance due on Tuesday ahead of the key event. The key highlight will be the Fed interest rate decision on Wednesday ahead of the SNB meeting on Thursday. These events could trigger the volatility in the market and give a clear direction for the USD/CHF pair.