The USD/CHF pair is experiencing a decline as the US Dollar (USD) weakens, despite the positive performance of US Treasury yields. With the 2-year and 10-year yields standing at 4.36% and 3.86% respectively, the USD/CHF trades lower around 0.8620 during the Asian session on Thursday. However, the US Dollar Index (DXY) remains at around 102.30, indicating that the dovish sentiment surrounding the US Federal Reserve’s interest rate trajectory in early 2024 is imposing downward pressure on the Greenback.
Despite the challenges faced by the US Dollar, it found some temporary support on Wednesday with the release of positive economic data. The US Existing Home Sales Change indicated a monthly rate increase of 0.8% in November, rebounding significantly from the previous decline of 4.1%. Moreover, CB Consumer Confidence experienced substantial growth in December, marking the highest increase since early 2021, rising from 101.0 to 110.07. Although these figures provide a glimmer of hope, market participants are eagerly awaiting the release of US Gross Domestic Product Annualized (Q3), Initial Jobless Claims, and Philadelphia Fed Manufacturing Survey on Thursday to gain further insights into the state of the US economy.
In its December meeting, the Swiss National Bank (SNB) decided to maintain the policy rate at 1.75%. The Quarterly Bulletin released on Wednesday also revealed that SNB’s sight deposits held at the central bank are remunerated at the SNB policy rate up to a specified threshold, and at 1.25% above this threshold. Furthermore, the SNB expressed its readiness to intervene in the foreign exchange market as necessary, demonstrating a proactive approach in managing currency dynamics.
While inflation has seen a slight decline in the past quarter, there is still significant uncertainty in the economic landscape. Inflation stood at 1.4% in November, showing a modest decrease compared to previous months. However, it is expected to rise once again in the coming months due to higher electricity prices, increased rents, and the impact of a Value Added Tax (VAT) increase. The SNB is committed to closely monitoring inflation and is prepared to make adjustments to its monetary policy if necessary. The main objective is to ensure that inflation remains within a range that aligns with price stability over the medium term.
The USD/CHF pair is facing downward pressure as the US Dollar struggles to maintain its strength. Despite positive US economic data, the Greenback is influenced by the dovish sentiment surrounding the US Federal Reserve’s interest rate trajectory. Meanwhile, the Swiss National Bank remains proactive in managing currency dynamics and monitoring inflation. As inflation is anticipated to increase in the coming months, the SNB is prepared to adjust its monetary policy to maintain price stability. Market participants will continue to monitor the US economy and key indicators to gain insights into the future performance of the USD/CHF pair.
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