USD/CHF struggles around 0.8950 as US yields decline

• USD/CHF faces challenges as the US Dollar declines amid lower yields.

• Stronger US PMI data has fueled speculation about delaying the Fed's rate cut, which in turn supports the Greenback.

• The Swiss Franc may further struggle as the SNB is expected to implement another rate cut in September.

USD/CHF retraces its gains from the last three sessions, trading around 0.8930 during the early European session on Monday. The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, edges lower to near 105.70. This downward correction could be attributed to the decline in the 2-year and 10-year yields on US Treasury bonds standing at 4.73% and 4.25%, respectively, at the time of writing.

The downside of the US Dollar (USD) may limit itself as the higher-than-expected US Purchasing Managers Index (PMI) from Friday boosted the speculation of delaying interest rate cut by the Federal Reserve. According to the CME FedWatch Tool, investors are pricing in nearly 65.9% odds of a Fed rate cut in September, compared to 70.2% a week earlier.

The US Composite PMI for June surpassed expectations, rising to 54.6 from May’s reading of 54.5. This figure marked the highest level since April 2022. The Manufacturing PMI increased to a reading of 51.7 from a 51.3 figure, exceeding the forecast of 51.0. Similarly, the Services PMI rose to 55.1 from 54.8 in May, beating the consensus estimate of 53.7.

The Swiss Franc (CHF) struggled against the US Dollar (USD) after the Swiss National Bank (SNB) decided to cut rates for the second time in the year, lowering rates from 1.50% to 1.25% on Thursday.

Additionally, SNB Chairman Thomas Jordan said the CHF strengthened significantly in recent weeks, adding that the central bank is ready to intervene in the FX market, per Reuters. This might have put pressure on the Swiss Franc and underpinned the USD/CHF pair.

Traders will likely observe the ZEW Survey Expectations, which will be published by the Centre for European Economic Research on Wednesday. This survey will present business and employment conditions in Switzerland.

USD/CHF