The USD/CHF pair is currently experiencing a positive trajectory, largely propelled by a strengthening US Dollar (USD), which appears to be influenced by a prevailing risk-off sentiment. This sentiment finds its roots in the anticipation surrounding the imminent release of key economic indicators, notably the US Gross Domestic Product Annualized data scheduled for Thursday and the Personal Consumption Expenditures (PCE) report set for Friday. As a consequence, the USD/CHF pair surged to a four-month peak, hovering around the 0.9050 mark in the early European trading hours on Wednesday.
However, the recent downturn in US Treasury yields could be attributed to market expectations of potential rate cuts by the US Federal Reserve (Fed) in June. Such sentiments may exert a dampening effect on the momentum of the US Dollar, consequently applying pressure on the USD/CHF pair.
Meanwhile, the Swiss Franc (CHF) has undergone depreciation, partly due to the divergent monetary policies pursued by the Swiss National Bank (SNB) and the Federal Reserve. In a surprising move during its March meeting, the SNB announced a 25 basis points reduction in its benchmark interest rate to 1.5%, marking the first rate cut among major central banks since the onset of global disinflation in 2023. This decision has further weakened the CHF, extending its year-to-date decline. Notably, being the first G10 central bank to implement such a measure is likely to undermine the strength of the currency.
Despite these dynamics, the Swiss Franc could have seen a potential uptick in its value amidst risk aversion stemming from the European Union’s (EU) initiation of investigations into major tech corporations such as Apple, Google, and Meta on Monday. Additionally, escalating geopolitical tensions between Ukraine and Russia may prompt investors to seek refuge in safe-haven assets like the CHF.
