• USD/CHF faces challenges due to rising dovish sentiment surrounding the Fed’s policy outlook.
• The weaker US Consumer Confidence Index contributes to dovish expectations for the Fed for its upcoming policy decisions.
• The Swiss Franc may struggle as SNB is expected to implement a 25 basis point rate cut on Thursday.

USD/CHF extends its losses for the third successive day, trading around 0.8420 during the Asian hours on Wednesday. This downside of the pair could be attributed to the subdued US Dollar (USD) following the strengthening dovish sentiment surrounding the US Federal Reserve’s (Fed) policy outlook.

On Tuesday, the weaker US consumer confidence data added to dovish expectations for the Federal Reserve (Fed) for its upcoming policy decisions. US Consumer Confidence Index fell to 98.7 in September from a revised 105.6 in August. This figure registered the biggest decline since August 2021.

However, Federal Reserve Governor Michelle Bowman stated on Tuesday that key inflation indicators are still "uncomfortably above" the 2% target, urging caution as the Fed moves forward with interest rate cuts. Despite this, she expressed a preference for a more conventional approach, advocating for a quarter percentage point reduction.

The downside of the USD/CHF pair could be restrained as the Swiss Franc (CHF) may receive downward pressure as the Swiss National Bank (SNB) is expected to lower rates by 25 basis points (bps) on Thursday. Additionally, the probability of a 50-bps cut has increased, with markets now seeing a one-in-three chance, up from zero a month ago.