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USD/CHF traces an upward trend due to the Fed’s hawkish stance on interest rate trajectory.
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US Dollar strengthens on higher US Treasury yields, coupled with Solid US jobs data.
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SNB is expected to maintain steady interest rates at the upcoming meeting.
USD/CHF hovered near seven-month highs marked on Tuesday, trading higher for a third consecutive day near 0.9220 during early European trading hours on Wednesday. The pair is experiencing upside support amid cautious sentiment due to the US Federal Reserve’s (Fed) interest rate trajectory.
The US dollar index (DXY) is near 107.10 at the time of writing, aligning with the 11-month high marked on Tuesday. US dollar (USD) strength is driven by strong US employment data and higher US Treasury yields.
US JOLTS job openings beat expectations, contributing to higher US Treasury income. The yield on the 10-year US bond reached its highest level since 2007, hitting 4.85% on Wednesday.
The JOLTS report revealed that job openings rose to 9.61 million in August from the previous reading of 8.92 million, beating market expectations. Additionally, the hawkish tone surrounding the Fed keeping interest rates higher for a longer period of time is reinforcing positive sentiment for the greenback.
Cleveland Federal Reserve President Loretta Mester indicated the possibility of an interest rate hike at the next meeting if current economic conditions persist. On the other hand, Atlanta Fed President Raphael Bostick shared a more tolerant view on the Fed’s policy outlook, noting that there is no rush to raise or lower rates.
Market participants are eagerly awaiting US employment data with the release of the ADP report on Wednesday and Nonfarm Payrolls on Friday.
On the Swiss side, the Swiss National Bank (SNB) decided to keep interest rates at 1.75%, deviating from the expected 2.00%. The central bank justified the decision by citing significant tightening observed in recent quarters as a counterbalance to lingering inflationary pressures.
The latest Swiss CPI data reiterated that inflation remained comfortably within the SNB’s 0-2% target band for both headline and core measures. The unemployment rate, maintaining its previous reading, remains at a cycle low.
The Manufacturing PMI has witnessed a significant rebound, although it remains in contraction, while the Services PMI is in expansion.
Market expectations are consistent with the expectation that the SNB will keep rates steady at the upcoming meeting.
USD/CHF: ADDITIONAL IMPORTANT LEVELS
