USD/CHF: Bears target mid-0.8900s as USD pulls back before inflation hints

During Monday’s European trading session, the USD/CHF currency pair is witnessing a downward trend, hovering around 0.8950, marking its first daily decrease in three days. This decline is primarily fueled by the US Dollar’s broad retreat and cautiously optimistic market sentiment.

The US Dollar Index (DXY) is consolidating near 102.70 after posting its first weekly increase in a month. The DXY is being pressured by mild optimism regarding China’s economic outlook and easing geopolitical tensions involving Russia. Furthermore, market participants are awaiting US inflation figures and speeches from central bank officials, which contribute to the DXY’s downward pressure.

Over the weekend, reports of potential stimulus measures in China and uncertainties about Russian President Vladimir Putin’s influence in Moscow led to a marginally positive market sentiment. However, S&P’s gloomy China GDP forecasts and concerns over a hawkish stance from the Federal Reserve have tempered the overall risk-on mood.

Last week, Fed Chair Jerome Powell’s testimony notably reinforced a hawkish perspective for the US Federal Reserve’s upcoming actions. This stance was further supported by upbeat US PMI data and remarks from Federal Reserve Bank of San Francisco President Mary Daly, who advocated for two rate increases.

Conversely, Swiss National Bank (SNB) Chairman Thomas Jordan stated in an interview with Swiss broadcaster SRF that the SNB’s recent interest rate hike may be inadequate to effectively tackle Switzerland’s inflation, as reported by Reuters.

In this context, S&P 500 Futures have recovered from their lowest levels in a week, approaching the 4,400 mark and currently trading around 4,398, indicating a 0.20% intraday gain. Simultaneously, after ending a two-week downtrend, the yield of the US 10-year Treasury bond remains stable near 3.73%. Its two-year counterpart is set for its fourth consecutive weekly rise, currently around 4.74%.

Going forward, the market’s focus will be on US inflation data and speeches from top central bankers at the European Central Bank (ECB) Forum, as these factors are anticipated to be the primary catalysts for market movements, while India’s economic calendar stays light.

In summary, the USD/CHF pair is under bearish pressure as the US Dollar withdraws amid cautious optimism in the market. The decline is mainly attributed to the DXY’s consolidation and anticipation of US inflation data and central banker speeches. Market participants will closely watch upcoming events to assess their potential impact on the currency pair.