The USD/CHF pair sees its winning streak, initiated on January 11, come to an end as it edges lower to approximately 0.8670 during Tuesday’s Asian session. The weakening of the US Dollar (USD) is attributed to the challenge posed by lower US Treasury yields, with the 2-year and 10-year yields currently standing at 4.38% and 4.09%, respectively.
Despite the pressure from lower yields, the US Dollar finds support from hawkish comments made by US Federal Reserve (Fed) members. San Francisco Fed President Mary Daly emphasizes the central bank‘s ongoing efforts to bring inflation down to the 2.0% target, while Atlanta Fed President Raphael Bostic underscores a data-dependent approach, expressing openness to adjusting the outlook on rate cuts. These remarks contribute to a positive sentiment for the US Dollar.
US Dollar Index (DXY) and Risk Aversion
The US Dollar Index (DXY) experiences a slight decline to around 103.20 but continues to benefit from risk aversion sentiment driven by geopolitical concerns in the Middle East. The US Conference Board Leading Economic Index for December surpasses expectations, improving to -0.1% from -0.5%, offering additional support for the US Dollar. The release of the Richmond Fed Manufacturing Index for January later in the North American session is anticipated to provide further insights into the state of the US economy.
The Swiss Franc faces selling pressure following remarks from Swiss National Bank (SNB) Chairman Thomas Jordan, who expresses concerns about the impact of CHF strength on the SNB’s ability to maintain inflation above zero. Despite recent positive economic indicators, including a slight increase in Swiss consumer prices and improved consumer demand, the SNB’s decision-making in the upcoming meeting may be influenced.
Swiss Producer and Import Prices Influence SNB Policy
Swiss Producer and Import Prices (YoY) declined in December, potentially discouraging the Swiss National Bank from adjusting its monetary policy. In the December policy update, the SNB reaffirmed its commitment to adapting monetary policy as needed to maintain inflation within the range consistent with price stability over the medium term.