During the European trading hours on Monday, the USD/CHF pair traded around 0.9070, marking its second successive session of gains. The uptrend in the pair can be attributed to the prevailing hawkish sentiment surrounding the Federal Reserve (Fed), which intends to maintain higher interest rates for an extended period. This sentiment has notably bolstered the US Dollar, underpinning its strength against the Swiss Franc.
The hawkish stance of the Fed gains further traction from cautious remarks made by Federal Reserve officials regarding potential interest rate cuts. Notably, the cautious tone was reinforced by the US Consumer Sentiment Index released on Friday, which indicated a slowdown in the economy. The index, declining to 67.4 in May from April’s 77.2, marked a six-month low and fell short of market expectations. Consequently, this has exerted pressure on US Treasury yields, thus limiting the Greenback’s advancement.
According to Reuters, Neel Kashkari, President of the Minneapolis Federal Reserve, exercised prudence regarding the extent of monetary policy tightness. In an interview with CNBC on Friday, Kashkari highlighted that while the threshold for another rate hike is high, it should not be entirely ruled out. Similarly, San Francisco Fed President Mary Daly emphasized the necessity of maintaining a prolonged tight policy stance to attain the Federal Reserve’s inflation objectives.
At present, the US Dollar Index (DXY), reflecting the performance of the USD against six major currencies, hovers around 105.30. Meanwhile, the 2-year and 10-year yields on US Treasury bonds stand at 4.85% and 4.48%, respectively.
In Switzerland, the SECO Consumer Climate (YoY) experienced a slight decline in April, registering a reading of -38.1, compared to the previous -38.0 and an anticipated -40.0. Although showing a marginal decrease, it notably lags behind the long-term average.
Over the past week, the Swiss National Bank (SNB) witnessed its foreign exchange reserves climb to CHF 720 billion in April, marking the fifth consecutive increase. The SNB has shifted its focus from deliberately strengthening the Swiss Franc, redirecting attention towards combating inflation, reflecting evolving monetary policy priorities.
