The USD/CHF pair is experiencing a decline as the US Dollar (USD) moves downward, despite improved US Treasury yields. The 2-year and 10-year yields on United States (US) bond coupons stand higher at 4.36% and 3.86%, respectively. However, the US Dollar Index (DXY) trades around 102.30, indicating that the dovish sentiment surrounding the US Federal Reserve’s interest rate trajectory in early 2024 is putting pressure on the Greenback. Fed officials are urging a cautious approach and discouraging premature speculations, but the Dollar is still facing downward pressure.
Although the Greenback is facing challenges, it found temporary support on Wednesday with improved economic data from the United States. The US Existing Home Sales Change revealed a monthly rate increase of 0.8% in November, a significant rebound from the previous decline of 4.1%. Furthermore, CB Consumer Confidence experienced substantial growth in December, marking the most significant increase since early 2021, rising from 101.0 to 110.07.
Market participants are eagerly awaiting the release of the US Gross Domestic Product Annualized (Q3), Initial Jobless Claims, and Philadelphia Fed Manufacturing Survey on Thursday. These economic indicators will provide more cues and insights into the state of the US economy. The data will likely influence the direction of the USD/CHF pair.
The Swiss National Bank (SNB) has opted to keep the policy rate unchanged at 1.75% during its December meeting. According to the Quarterly Bulletin released on Wednesday, SNB’s sight deposits held at the central bank are remunerated at the SNB policy rate up to a specific threshold, and at 1.25% above this threshold. Additionally, the SNB has expressed its readiness to be active in the foreign exchange market as deemed necessary. This proactive stance in managing currency dynamics demonstrates the SNB’s commitment to maintaining stability.
Although there has been a slight decrease in inflation over the past quarter, uncertainty in the economic landscape remains elevated. In November, inflation stood at 1.4%, showing a modest decline compared to previous months. However, it is expected that inflation will likely increase once again in the coming months due to factors such as higher electricity prices, rising rents, and the impact of an increase in Value Added Tax (VAT).
The SNB is closely monitoring the development of inflation and has affirmed its commitment to reacting promptly if necessary. The central bank is prepared to make adjustments to its monetary policy to ensure that inflation stays within the range that aligns with price stability over the medium term.
The USD/CHF pair is currently facing a decline despite improved US bond yields. The US Dollar is moving downward due to the dovish sentiment surrounding the US Federal Reserve’s interest rate trajectory. However, improved economic data from the United States provided temporary support to the Greenback. Market participants are eagerly awaiting additional cues from upcoming economic indicators. Meanwhile, the SNB remains proactive in managing currency dynamics and closely monitoring inflationary pressures. The central bank stands ready to make adjustments to its monetary policy to ensure price stability over the medium term.