The USD/CHF pair has been gaining ground for the second consecutive session, trading around 0.9070 during European trading hours on Monday. This increase can be attributed to a firmer US Dollar driven by a hawkish sentiment surrounding the Federal Reserve (Fed). The Fed officials have made cautious remarks regarding interest rate cuts, which has further supported the strength of the Greenback. However, the decline in US Treasury yields following the release of the US Consumer Sentiment Index for May, which fell short of expectations, has limited the Dollar’s advance.
Neel Kashkari, President of the Minneapolis Federal Reserve (Fed), recently expressed caution regarding the extent of tightness in monetary policy, suggesting that another rate hike should not be completely dismissed. Additionally, San Francisco Fed President Mary Daly emphasized the importance of maintaining a prolonged tight policy stance to achieve the Federal Reserve’s inflation goals. The US Dollar Index (DXY) currently trades around 105.30, with 2-year and 10-year US Treasury bond yields at 4.85% and 4.48%, respectively.
In Switzerland, SECO Consumer Climate (YoY) saw a slight decline in April, with a reading of -38.1 compared to the previous -38.0 and an expected -40.0. Although the figure still trailed the long-term average, it indicates a relatively stable consumer sentiment in the country. The Swiss National Bank (SNB) also saw its foreign exchange reserves increase to CHF 720 billion in April, marking the fifth consecutive rise. The central bank has shifted its focus from actively strengthening the Swiss Franc (CHF) to combatting inflation, which has implications for the Swiss economy as a whole.
Overall, the USD/CHF pair is likely to continue its upward momentum in the near term, supported by the firmer US Dollar and cautious stance from Fed officials. However, the decline in US Treasury yields and potential headwinds from the global economic slowdown could pose challenges to the strength of the Greenback. Investors will closely monitor developments in both the US and Swiss economies, as well as any policy changes from the Federal Reserve and Swiss National Bank, to assess the future direction of the USD/CHF pair.
