The USD/CHF currency pair retreated during Asian trading hours on Tuesday, slipping to around 0.8430 after posting gains of over 2% in the previous session. The pullback follows a softening in the U.S. Dollar, potentially driven by technical correction ahead of key economic data.
The U.S. Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, edged lower to near 101.50. Market participants are now closely watching the upcoming U.S. Consumer Price Index (CPI) report for April, scheduled for release later today. Economists expect headline inflation to rebound to 0.3% month-over-month from a decline of 0.1% previously. Core CPI is also projected to increase to 0.3%, up from 0.1%. On an annual basis, both readings are forecast to remain unchanged.
The sharp rally in USD/CHF on Monday was fueled by encouraging signs from U.S.-China trade negotiations. Over the weekend, the two economic giants reached a preliminary trade agreement in Switzerland, which includes significant tariff reductions. Under the terms, the U.S. agreed to slash tariffs on Chinese imports from 145% to 30%, while China committed to lowering duties on American goods from 125% to 10%. The breakthrough boosted investor sentiment and was seen as a constructive step toward easing global trade tensions.
As trade frictions eased, investors showed a renewed appetite for riskier assets, dampening demand for the safe-haven Swiss Franc. In tandem, the yield on 10-year Swiss government bonds climbed to approximately 0.37%, reflecting the global rise in borrowing costs amid improved risk sentiment.
Nevertheless, the upward momentum in Swiss yields remains tempered by expectations of further monetary stimulus from the Swiss National Bank (SNB). Last week, SNB Chairman Martin Schlegel reaffirmed the central bank‘s readiness to intervene in foreign exchange markets and even lower interest rates—potentially into negative territory—should inflation persistently fall short of the SNB’s target.
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