During the early hours of Wednesday’s European trading session, the USD/CHF pair lingered around the 0.9140 mark, closely mirroring its six-month peak of 0.9152 attained on April 15. The Swiss Franc (CHF) finds itself amid challenges, primarily stemming from significant disparities in anticipated monetary policy directions between the US Federal Reserve (Fed) and the Swiss National Bank (SNB).
Switzerland’s annual inflation rate plunged to a low unseen in over two years, hitting 1% in March, underscoring the SNB’s position that underlying inflationary pressures have subsided. This, coupled with bleak Business Confidence indicators and a dip in Retail Sales figures, has bolstered market sentiments, raising expectations that the SNB might enact another interest rate reduction come June.
The CHF had already undergone substantial depreciation subsequent to the Swiss National Bank’s unexpected decision to slash its key interest rate by 25 basis points to 1.50% in March, marking a significant departure from its previous stance favoring tighter monetary measures.
Across the Atlantic, the likelihood of the Federal Reserve maintaining status quo on interest rates during its June meeting has escalated to 84.6%, climbing from the prior week’s 82.7%, as per data from the CME FedWatch Tool.
The US Dollar Index (DXY), gauging the performance of the USD against six major currencies, has rebounded, fueled by an uptick in the 10-year yield on US Treasury bonds, presently resting at 4.62%, indicating a 0.54% increase at the time of reporting. Nonetheless, lackluster data from the US Purchasing Managers Index (PMI) is exerting downward pressure on the Greenback, thereby curbing the advancement of the USD/CHF pair.
In April, the preliminary S&P Global Composite PMI for the US dwindled to 50.9 from the previous reading of 52.1. Moreover, the Manufacturing PMI contracted to 49.9 from 51.9 in the prior reading, falling short of the anticipated 52.0. Similarly, the Services PMI receded to 50.9 compared to the preceding 51.7, failing to meet the projected 52.0.
