USD/CHF moves lower near 0.8620 on subdued US Dollar, focus on US Data

• USD/CHF edges lower as the US Dollar fails to continue gaining.
• The Greenback faces challenges despite upbeat US bond yields.
• SNB can intervene in the foreign exchange market to support the Swiss Franc.

USD/CHF trades lower around 0.8620 during the Asian session on Thursday. The USD/CHF pair loses ground as the US Dollar (USD) moves downward despite improved US Treasury yields. The 2-year and 10-year yields on United States (US) bond coupons stand higher at 4.36% and 3.86%, respectively, by the press time.

The US Dollar Index (DXY) trades around 102.30, and it seems like the dovish sentiment surrounding the US Federal Reserve’s interest rate trajectory in early 2024 is putting pressure on the Greenback. Despite Fed officials urging a cautious approach and discouraging premature speculations, the Dollar is facing downward pressure.

However, the Greenback found support on Wednesday with improved economic data from the United States. The US Existing Home Sales Change revealed a monthly rate increase of 0.8% in November, a significant rebound from the previous decline of 4.1%. Additionally, CB Consumer Confidence experienced substantial growth in December, marking the most significant increase since early 2021, rising from 101.0 to 110.07.

Market participants await the US Gross Domestic Product Annualized (Q3), Initial Jobless Claims, and Philadelphia Fed Manufacturing Survey on Thursday to gain more cues in the US economy.

In its December meeting, the Swiss National Bank (SNB) opted to keep the policy rate unchanged at 1.75%. According to the Quarterly Bulletin released on Wednesday, SNB’s sight deposits held at the central bank are remunerated at the SNB policy rate up to a specific threshold, and at 1.25% above this threshold. Additionally, the SNB expressed its readiness to be active in the foreign exchange market as deemed necessary, indicating a proactive stance in managing currency dynamics.

The inflationary pressure has seen a slight decrease over the past quarter, but uncertainty in the economic landscape remains elevated. In November, inflation stood at 1.4%, showing a modest decline compared to previous months. However, the expectation is that inflation will likely increase once again in the coming months. This anticipated uptick is attributed to factors such as higher electricity prices, rising rents, and the impact of an increase in Value Added Tax (VAT).

The SNB has affirmed its commitment to closely monitor the development of inflation. Should the need arise, the SNB is prepared to make adjustments to its monetary policy. The primary objective is to ensure that inflation stays within the range that aligns with price stability over the medium term.