USD/CHF gains traction below the 0.9000 barrier on firm US Dollar, SNB’s surprise rate cut

• USD/CHF holds positive ground around 0.8990 in Friday’s early European session. 
• The Swiss National Bank (SNB) announced a surprise rate cut to its key interest rate to 1.5% on Thursday.
• US S&P Global Manufacturing PMI came in stronger than expected, climbing to 52.5 in March vs. 52.2 prior. 

The USD/CHF pair gains traction below the 0.9000 psychological barrier during the early European session on Friday. The Swiss Franc (CHF) has faced some selling pressure after the Swiss National Bank (SNB) cut its main interest rate by 25 basis points (bps) to 1.50% in a surprise move on Thursday. At the press time, USD/CHF is trading at 0.8990, adding 0.15% on the day. 

The Swiss central bank decided to cut interest rates from 1.75% to 1.50% on Thursday, marking the first central bank to declare victory over inflation. Following the monetary policy meeting, SNB Chairman Thomas Jordan said that the easing of monetary policy was possible because the fight against inflation has been effective. The move comes after Swiss inflation fell to 1.2% in February, which remained below the SNB's 0-2% target range. That being said, a surprise rate cut from the SNB drags the CHF lower and creates a tailwind for the USD/CHF pair. 

On the other hand, the US Federal Reserve (Fed) left its benchmark interest rate unchanged on Wednesday but retained its outlook for three rate cuts this year. Fed Chairman Jerome Powell stated that the upside surprises on US inflation data in January and February haven't changed the overall story that inflation is returning to its 2% target gradually on a somewhat bumpy road.

Data released on Thursday showed that the US S&P Global Manufacturing PMI came in stronger than expected, rising to 52.5 in March from 52.2 in February. Meanwhile, the Services PMI eased to 51.7 in March from 52.3 in February, weaker than the estimation of 52.0. Finally, the Composite PMI came in at 52.2 in March versus 52.5 prior.  

Investors await Federal Reserve (Fed) Chair Jerome Powell’s speech on Friday, which might offer some hints about the inflation and monetary policy outlook. Next week, the Swiss ZEW Survey for March and the SNB Quarterly Bulletin for the first quarter (Q1) of 2024 will be released, along with the US Gross Domestic Product Annualized (GDP) for Q4.