USD to CHF Soars to Mid-0.90s, Marking Highest Since June 13

The USD/CHF pair continued its robust climb, reaching levels not seen since mid-June after the Swiss National Bank (SNB) unveiled an unexpected policy decision. Currently trading around the mid-0.9000s, traders eagerly watch for potential further gains beyond the crucial 200-day Simple Moving Average (SMA).

Swiss National Bank Shocks Markets

This surprising move came as the SNB opted to maintain the key policy rate at 1.75%. It is contrary to predictions of a 25-bps increase in September. The SNB’s assertion that significant tightening in recent quarters counters remaining inflationary pressures suggests that rate hikes might be put on hold. Paired with the prevalent positive sentiment surrounding the US Dollar (USD), this decision reinforces the USD/CHF pair.

Fed-Driven USD Bullishness Fuels CHF Exchange Rate

The USD Index (DXY), tracking the Greenback’s performance against various currencies, edges closer to a six-month peak, propelling the CHF to USD pair even higher. On Wednesday, the Federal Reserve (Fed) chose to retain interest rates at a 22-year high, between 5.25% and 5.50%. However, they cautioned about persistent inflation, hinting at at least one more rate hike in 2023. Additionally, policymakers now anticipate the benchmark rate at 5.10% next year, indicating only two rate cuts in 2024 compared to the previously projected four.

Potential Capping of Further Gains

This solidifies the notion of sustained higher rates and keeps US Treasury bond yields on an upward trajectory. The yield on the two-year US government bond, closely tied to rates, has reached levels not seen since July 2006. Furthermore, the benchmark 10-year Treasury yield surged to a 16-year peak, offering substantial support to the Greenback and aiding the USD/CHF pair’s continued ascent over the past two months.

However, any dampening of risk sentiment could bolster the safe-haven money CHF, potentially capping further gains.

Anticipating US Economic Data Impact on USD to CHF Pair

Market participants now await the US economic docket. The docket features key releases like the Weekly Initial Jobless Claims. Besides, the Philly Fed Manufacturing Index and Existing Home Sales data will take place. These, alongside US bond yields, will be pivotal in influencing USD price dynamics and providing momentum to the 1 USD to CHF pair. Additionally, traders will closely monitor broader risk sentiment for short-term opportunities. Given the prevailing fundamentals, the path of least resistance for the USD/CHF pair appears to be upward.

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