USD/CHF oscillates in a range below 0.9000, Fed rate decision looms

• USD/CHF remains confined in a range around 0.8976 as investors turn to a cautious mood.
• The Federal Reserve (Fed) is widely expected to hold interest rate unchanged on Wednesday.
• The Swiss National Bank (SNB) is expected to raise additional interest rates from 1.75% to 2% on Thursday.
• Traders will closely watch The Fed, SNB monetary policy meeting this week.

The USD/CHF pair consolidates in a 0.8970-0.8980 range during the early Asian session on Wednesday. Meanwhile, the US Dollar Index (DXY), a measure of the value of USD against six other major currencies, holds above 105.10 after retracing from a six-month high of 105.40 last week. Markets turn cautious ahead of the Federal Reserve (Fed) interest rate decision on Wednesday. The pair currently trades near 0.8976, down 0.01% on the day.

The Federal Reserve (Fed) is set to announce its two-day monetary policy meeting on Wednesday, and interest rates are widely anticipated to remain in the 5.25% to 5.5% range. According to the CME Fedwatch Tool, the odds of keeping rates unchanged at 99%. However, markets remain cautious of the Fed's outlook, owing to a recent uptick in inflation data and the resiliency of the US economy, which could pave the way to additional rate hikes.

About the data, the US housing industry showed mixed results in August. The US Census Bureau showed on Tuesday that US Building Permits rose to 1.543M in August, above expectations and previous reading, while Housing Starts fell slightly to 1.283M.

Data released by the Swiss Federal Customs Administration on Tuesday revealed that the nation’s trade surplus rose to 4,054M in August from 3,132M in the previous month. Meanwhile, Exports improved by 20,735M in August from 20,713M prior. Imports grew 17,603M from 17,584M in the previous reading.

The Swiss National Bank (SNB) is expected to raise additional interest rates by 25 basis points (bps) from 1.75% to 2% on Thursday. The Swiss central bank is expected to keep its restrictive stance in place to ensure price stability as the latest nation’s inflation showed a 1.6% YoY increase, which is still below the 2% target. However, if SNB offers hints about its last hike, the monetary policy divergences between the US and Switzerland might continue to drive the pair higher.

Moving on, market participants will closely monitor 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.