- USD/CHF rises to a new multi-month high, supported by a number of reasons.
- Bets on more Fed rate hikes continue to drive up US bond yields and support the USD.
- The SNB’s unexpected halt continues to weigh on the CHF and bodes well for additional gains.
On Monday, the USD/CHF pair receives some dip-buying near 0.9045 and reaches its highest level since June 13 during the Asian session. Spot prices are currently trading at 0.9075-0.9080 and appear prepared to build on last week’s breakout momentum via a theoretically significant 200-day Simple Moving Average (SMA).
— Olivia Watson (@oliviawatson43) September 26, 2023
The likelihood of further Fed policy tightening helps the US Dollar (USD) to stand near a six-month high, which is considered as a crucial factor acting as a tailwind for the USD/CHF pair. In reality, the US Federal Reserve reinforced the longer-for-higher story last week, warning that still-sticky inflation would likely necessitate at least one more interest rate hike before the end of the year.
The Euro fell around -0.5% against the US dollar on Monday. EUR/USD is now on track to post its 11th consecutive week of losses, tying the longest losing streak on record since 1997.#EURUSD #Crypto #ForexMarket https://t.co/uHrylZVYUJ pic.twitter.com/uQ337GtG16
— FOLLOWME Trading Community (@FollowmeOffici2) September 26, 2023
Furthermore, the so-called ‘dot-lot’ showed only two rate decreases in 2024, as opposed to four previously projected. This resulted in a prolonged selloff in the US fixed-income market, with the yield on the rate-sensitive two-year government bond reaching its highest level since 2007. Furthermore, the benchmark 10-year US Treasury yield is approaching a 16-year high, lending strength to the dollar and USD/CHF pair.
The Swiss Franc (CHF), on the other hand, is under pressure after the Swiss National Bank (SNB) broke its five-week sequence of increases last week. At the end of the quarterly monetary policy meeting, the SNB chose to hold its benchmark interest rate steady, defying expectations for a 25 basis point increase in the light of sub-2% inflation readings and recent dismal economic indicators.
Franc weakens as SNB's logical move surprises markets🚀📊
The Swiss National Bank left its key interest rate unchanged at 1.75%. On average, markets had been predicting a 25-basis point hike, contrary to our expectations.🌟🚀 pic.twitter.com/DyG3VNZMsJ
— Trader Benjamin Gregory (@_Benjamin_Greg) September 23, 2023
This, together with acceptance above the critical 200-day SMA, bodes well for an extension of the USD/CHF pair’s well-established uptrend over the last two months or so. In the absence of any market-moving economic data from the United States on Monday, US bond yields will play a significant role in affecting USD price dynamics and providing some impetus to the USD/CHF pair.
- The Market’s Week Ahead: Spotlight on US Dollar, Fed, Sterling, BoE, Yen, BoJ & More
- Pound Takes a Dive: BoE’s Decision Looms. Predictions for GBP/USD & EUR/GBP?
- Asia’s Calm Prelude: STI Holds Steady, While AUD/USD Wrestles