USD/CHF holds position above 0.9050 as the US Dollar remains firmer

• USD/CHF inches higher due to a firmer US Dollar driven by cautious remarks from Fed officials.
• The decline in the US Treasury yields limits the advance of the Greenback.
• Swiss Consumer Climate (YoY) came in at the reading of -38.1 for April, compared to -38.0 prior.

USD/CHF gains ground for the second successive session, trading around 0.9070 during the European trading hours on Monday. The US Dollar remains firmer due to the hawkish sentiment surrounding the Federal Reserve (Fed) to maintain higher interest rates for an extended period, underpinning the USD/CHF pair. This sentiment is bolstered by the cautious comments from Federal Reserve (Fed) officials regarding interest rate cuts.

However, Friday’s release of the US Consumer Sentiment Index added to evidence suggesting a slowdown in the economy. The index declined to 67.4 in May from April’s 77.2, hitting a six-month low and falling short of market expectations. This has put pressure on the US Treasury yields, limiting the advance of the Greenback.

As per Reuters, Neel Kashkari, President of the Minneapolis Federal Reserve (Fed), exercised caution regarding the extent of tightness in monetary policy. In an interview with CNBC on Friday, Kashkari remarked that although the bar for another rate hike is high, it should not be completely dismissed. Furthermore, San Francisco Fed President Mary Daly stressed the importance of sustaining a prolonged tight policy stance to achieve the Federal Reserve’s inflation goals.

The US Dollar Index (DXY), which gauges the performance of the US Dollar (USD) against six major currencies, trades around 105.30 with 2-year and 10-year yields on US Treasury bonds standing at 4.85% and 4.48%, respectively, by the press time.

In Switzerland, SECO Consumer Climate (YoY) experienced a slight decline in April, with a reading of -38.1, compared to the previous -38.0 and an expected -40.0. However, it still significantly trailed the long-term average.

Over the past week, the Swiss National Bank (SNB) saw its foreign exchange reserves climb to CHF 720 billion in April, marking the fifth consecutive increase. The SNB has redirected its attention from deliberately strengthening the Swiss Franc (CHF), as the central bank intensifies its focus on combating inflation.