USD/CHF Tumbles After Disappointing US Services PMI

: George Solotarov; 03 April 2024; Hits: 151

USD/CHF Tumbles After Disappointing US Services PMI

The USD/CHF pair experienced a sharp decline from the 0.9100 resistance level following the release of weaker-than-expected US Services PMI data by the Institute of Supply Management (ISM). The Services PMI, a key indicator of the dominant US service sector, dropped to 51.4 in March, falling short of expectations for 52.7 and below the previous reading of 52.6.

Weakening USD, Improving Market Sentiment

The disappointing US Services PMI triggered a significant sell-off in the US Dollar. The US Dollar Index (DXY) slumped to 104.40, while the S&P 500 saw a surge after a muted opening, reflecting an improvement in market sentiment.

Furthermore, market expectations for a June Fed rate cut have diminished. The CME FedWatch tool indicates a reduced probability of 54% for a June rate cut, down from 70% a week prior. This shift in sentiment is supported by the rise in 10-year US Treasury yields to 4.39%.

Hawkish Fed Rhetoric Dampens Expectations for Rate Cuts

The decline in market expectations for a Fed pivot towards rate cuts stems from hawkish comments by Fed policymakers. Atlanta Fed Bank President Raphael Bostic stated that he sees only one potential rate cut this year, emphasizing the ongoing momentum of the US economy.

Investors eagerly await Friday's release of the crucial US Nonfarm Payrolls (NFP) data for March.

Swiss Franc Bolstered by Weak Retail Sales

The Swiss Franc received a boost from surprisingly weak Real Retail Sales data, which declined by 0.2% against a projected 0.4% growth. This signals a deepening cost-of-living crisis and strengthens expectations for further rate cuts by the Swiss National Bank (SNB), likely through quantitative easing measures.