- USD/CHF loses ground on risk aversion sentiment.
- US Dollar remains stable despite downbeat US bond yields.
- Market expects that the Fed will initiate a rate-cut cycle in March.
The USD/CHF continues to lose ground for the second straight session, edging lower to near 0.8640 during the Asian hours on Monday. The Swiss Franc (CHF) appears to be in demand against the US Dollar (USD), driven by an increase in risk aversion sentiment. This demand for the CHF could be attributed to heightened tensions in the Middle East, as geopolitical uncertainties often lead investors to seek safe-haven currencies like the Swiss Franc.
There is uncertainty regarding the Swiss National Bank’s (SNB) stance on the persistent strength of the Swiss Franc. Despite concerns about the CHF’s strength, it is not expected that the SNB will intervene in the foreign exchange market by purchasing foreign currency to restrain the appreciation of the CHF.
The US Dollar Index (DXY) maintains stability around 103.50, with subdued 2-year and 10-year US Treasury yields at 4.34% and 4.13%, respectively, at the time of writing. Despite the release of moderate US Core Personal Consumption Expenditures Price Index (PCE) data on Friday, the US Dollar failed to find support. The December Core PCE reported a 0.2% monthly increase, meeting expectations and surpassing the previous reading of 0.1%. However, the yearly Core PCE rose by 2.9%, falling short of the expected 3.0% and the previous reading of 3.2%.
As inflation shows signs of cooling off, investors are anticipating the possibility of the Federal Reserve (Fed) implementing policy easing. The CME FedWatch Tool suggests that futures traders have priced in a 53% probability of the Fed cutting interest rates for the first time in this cycle during the March meeting. However, the upcoming Federal Open Market Committee (FOMC) statement on January 31 is expected to maintain the Fed Funds rate unchanged.
Traders are likely to closely monitor key economic indicators, including Tuesday’s releases of the US Housing Price Index and Consumer Confidence figures to gain additional market insights. On the Swiss docket, Wednesday’s Real Retail Sales and the ZEW Survey will be eyed to assess the overall health of the Swiss economy.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
