The Dollar Index has resumed higher today, with the greenback rising most notably against the euro ahead of the European Central Bank meeting tomorrow. The likes of the USD/JPY and USD/CHF have also started the day on the front foot, with haven currencies falling out of favour amid a risk-on day in the stock markets after China released a tariff exemptions list for products from the US this morning, in a further sign of de-escalation in the dispute.
With the dollar appreciating, the pressure is growing on the Fed to cut interest rates more aggressively, not least from President Donald Trump who was at it again today. He tweeted that the Fed “should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term… It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing…”
Tomorrow, the European Central Bank is widely expected to cut interest rates slightly, while the Federal Reserve is seen delivering a 25 basis-point rate cut next week.As a result of the dollar rally, the USD/CHF looks poised for a bullish breakout. Rates have been printing higher highs and higher lows since that false breakdown attempt was made in mid-August around the 0.9700 handle. Nearly a month later, the Swissy has already broken its bearish trend line and at the time of writing it was trying to re-capture the 200-day average around 0.9950. Unless a bearish reversal pattern unexpectedly forms here, it looks like the USD/CHF may drift higher over the coming days and head towards and potentially beyond parity.
Source: eSignal and City Index.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.