The USD/CHF pair is experiencing a decline, retreating towards the 0.8700 level during the Asian session on Tuesday after two consecutive days of gains. The Swiss Franc (CHF) appears to be buoyed by the improved 10-year Swiss bond yield, currently standing at 0.93%. This movement in bond yield could be influenced by global market sentiment, shaped in part by recent remarks from Federal Reserve Chair Jerome Powell, suggesting that a rate cut in March is premature.
The Swiss National Bank (SNB), in its final meeting of 2023, decided to maintain its key interest rate at 1.75%, signaling the conclusion of its recent tightening cycle. Monthly consumer prices remained stable, with a slight uptick observed in the core rate. Analysts anticipate that, considering the subdued inflation projections for the current year, the SNB might contemplate its first rate cut in September 2024.
Meanwhile, the US Dollar Index (DXY) is taking a breather after posting gains in the preceding two sessions. The DXY is slightly lower around 104.30, potentially influenced by weakened US Treasury yields. Presently, the 2-year and 10-year yields on US bonds stand at 4.43% and 4.12%, respectively.
January saw the US ISM Services Purchasing Managers’ Index (PMI) exceeding expectations at 53.4, surpassing both the anticipated figure of 52.0 and the prior month’s 50.5. Additionally, the ISM Services Employment Index rose to 50.5 from the previous reading of 43.8.
Federal Reserve Chairman Jerome Powell emphasized the need to closely monitor inflation’s sustained movement toward the 2% core target. This stance has contributed to strengthening the US Dollar, offering support to the USD/CHF pair. As market dynamics continue to evolve, traders and investors are carefully watching the interplay between global sentiment, central bank decisions, and economic indicators for further cues on the USD/CHF pair’s trajectory.
