USD/CHF falls toward 0.8950 after pulling back from five-month highs

• USD/CHF retreats after hitting its five-month high at 0.9021 on Thursday.
• The Fed’s ‘dot-plot’ suggested only two rate cuts in 2025.
• The Swiss trade surplus narrowed to 5,424 million in November, down from the previous surplus of 8,025 million.

USD/CHF edges lower following Switzerland’s trade balance data released on Thursday. The pair trades around 0.8970 during the European hours after pulling back from five-month high at 0.9021.

Additionally, the USD/CHF appreciated as the US Dollar (USD) strengthened following the Federal Reserve’s (Fed) hawkish 25 basis point (bps) rate cut at its December meeting, bringing the benchmark lending rate to a range of 4.25%-4.50%, marking a two-year low.

The US Dollar Index (DXY) reached 108.28, the highest level not seen since November 2022, on Thursday as the Fed’s Summary of Economic Projections, or ‘dot-plot’, suggested only two rate cuts in 2025, down from four cuts projected in September.

Additionally, Fed Chair Jerome Powell stated that the Fed will be cautious about further cuts as inflation remains stubbornly above the central bank’s 2% target. Traders are highly expected to focus on upcoming US economic data, including weekly Initial Jobless Claims, Existing Home Sales, and the final Q3 Gross Domestic Product (GDP) Annualized reading, scheduled for release on Thursday.

Switzerland's Trade Balance, released by the Federal Customs Administration, showed a narrowing surplus of 5,424 million in November, down from 8,025 million in October. On a month-on-month basis, exports declined to 23,682 million, while imports fell to 18,257 million.

The Swiss Franc (CHF) remains under pressure as the Swiss National Bank (SNB) reaffirmed its commitment to maintaining price stability over the medium term, signaling readiness to adjust monetary policy if needed. Switzerland's State Secretariat for Economic Affairs (SECO) has downwardly revised growth targets for the current year and 2025 to 0.9% and 1.5%, respectively.