The USD/CHF pair maintains its composure, hovering near 0.8520 during the Asian session on Wednesday after posting gains in the previous session. The US Dollar Index (DXY) remains above 102.50, supported by steady US bond yields, with the 2-year and 10-year yields standing at 4.35% and 4.02%, respectively.
The recent market sentiment experienced a shift from risk-on to risk aversion. Initially triggered by Atlanta Federal Reserve President Raphael W. Bostic’s remarks speculating interest rate cuts by the end of 2024, the risk-on sentiment weakened the US Dollar. Bostic mentioned that inflation has declined more than initially anticipated, expressing the expectation of two quarter-point cuts by the end of 2024.
However, a subsequent shift in market sentiment towards risk aversion prompted investors to retreat to the US Dollar, providing upward support to the USD/CHF pair. Additionally, investors are closely eyeing December’s Consumer Price Index (CPI) data from the United States, scheduled for release on Thursday, which could influence market expectations regarding the Fed‘s monetary policy stance.
On the Swiss front, recent economic data supported the Swiss Franc (CHF), contributing to its gains. December’s Consumer Price Index (YoY) extended growth from 1.4% to 1.7%, while Real Retail Sales improved to 0.7%, surpassing the expected reading of 0.0%. Tuesday’s seasonally adjusted Unemployment Rate improved to 2.2% from the previous rate of 2.1%.
Furthermore, the Swiss National Bank (SNB) anticipates an annual loss of approximately 3 billion CHF for the last year. This is attributed to the considerable strength of the Swiss Franc (CHF), offsetting capital gains from the bank’s equity and bond portfolios in foreign currencies. The USD/CHF pair’s movements are closely tied to economic data releases and broader market sentiment.
