Forex News

• USD/CHF reversal from 0.8313 has been contained above previous highs, at 0.8270.
• The US Dollar retreated following the Fed's decision amid slightly dovish-tilted comments from Fed Chairman Kevin Warsh.
• The immediate bias remains positive, although bullish momentum has faded.

The US Dollar (USD) nurses minor gains against the Swiss Franc (CHF) on Thursday, with markets calm in the aftermath of the US Federal Reserve (Fed) meeting. The USD/CHF pair trades at 0.8285, with the immediate bullish trend still on play as Wednesday’s reversal from 0.8313 was contained above previous highs, in the 0.8270 area.

The Fed met expectations and left interest rates unchanged on Wednesday, while Chairman Kevin Warsh refused to confirm a December rate hike. Warsh also showed confidence that monetary policy is starting to work and suggested that the bank might be able to bring inflation down to the 2% target without compromising growth or having to "throw people out of work”, which was seen by the markets as tilted to the dovish side.

In Switzerland, the ZEW Survey, released on Wednesday, revealed that economic expectations for the next six months deteriorated in October to their lowest levels since March, increasing pressure on the Swissie.

Technical Analysis: US Dollar remains bid, although bulls have lost momentum

USD/CHF trades at 0.8285, holding a mild bullish bias, although momentum indicators are mixed. The 4-hour Relative Strength Index (14) stays in positive territory at 56, while the Moving Average Convergence Divergence (MACD) indicator has slipped marginally below zero, hinting at slowing upside momentum rather than a full-fledged reversal.

Bears remain contained above the October 19 high, in the 0.8270 area, which, so far, is closing the path towards the October 25 low near 0.8230 and the key support area between 0.8180 and 0.8190.

On the topside, immediate resistance is located at Wednesday's high near 0.8315, with a break exposing the 17-month highs near 0.8400.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Commerzbank’s Antje Praefcke notes that while the European Central Bank (ECB) is unlikely to change rates today, its stance on future hikes is key for the Euro. Concerns over France’s public finances and falling headline inflation argue for caution next year. If markets scale back expectations for further ECB tightening, EUR/USD could drift lower toward 1.10.

ECB caution threatens Euro outlook

"The next major interest rate decision is coming up today. As with the Fed, however, one thing is clear: nothing is going to change today. Just as with the Fed, the ECB’s future course of action is also important."

"Our experts think an interest rate hike in December is a done deal, and the market has largely priced it in, but doubts remain nonetheless. This is likely due to the situation in France - after all, the yield spread between French and German government bonds has widened further. While ECB officials are saying that the debt problem is primarily France’s to solve - presumably to signal that the French government should not simply rely on the ECB as a lifeline but should make efforts to resolve the issue on its own. Nevertheless, every interest rate hike by the ECB naturally also raises yields and thus exacerbates France’s problem of getting its public debt under control due to rising interest payments."

"For this reason, the ECB is likely to exercise caution when it comes to announcing further interest rate hikes next year. Another argument for the ECB to adopt a wait-and-see stance next year is likely to be that overall inflation (due to the base effect) will fall next year. Core inflation, however, will take longer to ease - this is not expected to happen until mid-2027."

"What does this mean for the euro? The market still sees a chance for one more ECB rate hike by mid-next year, and even two by the end of 2027. If it has to revise its expectations downward because the ECB is already sounding cautious today, the euro could weaken even further."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• EUR/USD pulls back to the 1.1130 area but remains contained within Wednesday's range.
• A string of mixed Eurozone sentiment indicators has failed to ease pressure on the Euro.
• Investors are awaiting the ECB for confirmation of a December rate hike.

The Euro (EUR) trades lower against the US Dollar (USD) on Thursday, with price action contained within Wednesday’s range, as investors bide their time ahead of the European Central Bank’s (ECB) monetary policy decision. The EUR/USD pair edges down to the 1.1130 area from highs near 1.1170 on Wednesday, with bears looking at the 17-month low at 1.1113.

Sentiment data released by the European Commission on Thursday was mixed. Business Climate picked up to 0.09 in October from -0.05 in September, reaching positive figures for the first time in the last three years, while Consumer Confidence remained unchanged at -17.9, and the Economic Sentiment Index declined to 96.9 against market expectations of a steady 97.5 reading.

France poses an additional challenge for the ECB

Later in the day, the ECB is widely expected to leave its Deposit Facility rate unchanged at 2.5% and, highly likely, to hint at further monetary tightening ahead, as the high Oil prices stemming from the Middle East war are boosting consumer inflation at levels well above the ECB’s target.

The main topic at the meeting, however, is likely to be France’s debt, which has reached concerning levels, boosting French Treasury yields to 24-year highs and throwing a spanner in the works for the central bank’s monetary policy plans.

Commerzbank analysts warn that “every interest rate hike by the ECB naturally also raises yields and thus exacerbates France’s problem of getting its public debt under control due to rising interest payments.” This might prompt the ECB to adopt a more cautious approach on future rate hikes, and erode one of the few Euro supports as of now.

The ECB Governing Council announced earlier in the day that President Christine Lagarde will step down in February 2027, without giving any clue about who will replace her. The impact on the Euro was minimal.

In the US, the Federal Reserve (Fed) met expectations and left rates unchanged on Wednesday. Chairman Kevin Warsh’s comments, however, were considered dovishly tilted, especially his confidence that the “monetary medicine is starting to work”, which suggests that the bank might not have to hike rates as much as the market expects. The US Dollar eased moderately following the Fed’s press release.