USD/CHF drops towards 0.9100, Swiss GDP arrives stronger than expected
- USD/CHF weakens to 0.9102 in Thursday’s early European session.
- The Swiss economy grew 0.5% QoQ in Q1, stronger than the estimation and the previous reading of 0.3% expansion.
- The Fed's Bostic said the central bank has a ways to go to curb the inflation seen over the last few years.
The USD/CHF pair attracts some sellers around 0.9102 on Thursday during the early European trading hours. The Swiss Franc (CHF) gains traction after the release of a stronger-than-expected Switzerland’s Gross Domestic Product (GDP) report for the first quarter (Q1) of 2024. USD/CHF currently trades 0.32% lower on the day.
The Swiss economy continued to expand in Q1, the State Secretariat for Economic Affairs (SECO) revealed on Thursday. Switzerland’s GDP numbers grew 0.5% QoQ in Q1. The figure came in better than the estimation and the previous reading of 0.3% expansion. On an annual basis, the GDP figure arrived at 0.6% YoY in Q1, above the market consensus of 0.5%. The upbeat GDP reading provides some support to the CHF and drags the USD/CHF lower to weekly lows.
Additionally, Switzerland's trade surplus stood at $4,316M in April from $3,767M in March, the Federal Office for Customs and Border Security (FOCBS) announced in a report on Thursday.
Apart from this, the rising geopolitical tensions in the Middle East might boost safe-haven assets like the Swiss Franc (CHF). On Wednesday, the BBC reported that Israel's military has announced that it has taken control of the Philadelphi Corridor, a strategically significant buffer zone along the Gaza-Egypt border, thereby controlling Gaza's entire land border.
On the USD’s front, the hawkish messages from Fed officials and stronger-than-expected US economic data have triggered the expectation that the US central bank will delay the interest rate cut this year. On Wednesday, Fed Atlanta President Bostic said that he’s hopeful that the elevated price pressures seen during the COVID-19 pandemic will decline over the next year. Bostic added that the Fed still has a ways to go to curb the significant price growth seen over the last few years.
Financial markets are now pricing in a 50% possibility that the Fed will hold interest rates in September, according to the CME FedWatch Tool. The wait-and-see mode of the Fed might provide some support to the Greenback and cap the downside for the pair. Investors will shift their attention to the second estimate of the US Gross Domestic Product (GDP) for Q1 2024 on Thursday, which is estimated to expand 1.3% in the first quarter of 2024.