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USD/CHF declines towards 0.9400 amid FOMC-inspired cheerful market mood

  • USD/CHF is expected to decline further to near 0.9400 as traction has shifted in favor of the risk-on profile.
  • Less-hawkish cues from FOMC minutes have weakened the US Dollar and yields.
  • A situation of robust consumer demand and weak real income could force households to bank upon higher borrowings.

The USD/CHF pair is hovering around 0.9423 in the early Asian session after two consecutive ultra-bearish sessions. Bears have snapped a six-day recovery in the past two trading sessions led by soaring investors’ risk appetite. Less-hawkish cues from Federal Open Market Committee (FOMC) minutes triggered a sell-off in the Greenback.

The major is expected to deliver more weakness and may slide to near the round-level support of 0.9400 as upbeat market sentiment is here to stay. The FOMC minutes indicate that the period of bigger rate hike announcements is over and a slowdown in the rate hike pace is necessary to observe the efforts made by central banks in achieving price stability.

Less-hawkish commentary from Federal Reserve (Fed) policymakers on interest rates guidance has weakened the US Dollar Index (DXY). The US Dollar has declined to near 106.10 and is expected to test the previous week’s low at 105.34. As the option of the fifth consecutive 75 basis points (bps) rate hike by the Fed is getting out of the picture, the returns generated by US Treasury bonds are losing their glory. The long-term US Treasury yields have dropped below 3.70%. Meanwhile, US markets are closed on Thursday on account of Thanksgiving Day.

Also, upbeat US Durable Goods Orders failed to support the US Dollar. The economic data improved by 1.0% vs. the expectations and the prior release of 0.4%. A situation of robust consumer demand and weak real income could force households to bank upon higher borrowing, which could lead to higher delinquency costs for the credit providers.

On the Swiss franc front, Swiss National Bank (SNB) Chairman Thomas J. Jordan cleared that monetary policy is still expansionary and ”we have most likely to adjust monetary policy again.” The Swiss central bank is entitled to bring the inflation rate in the 0-2% range and in response to that current monetary policy is restrictive enough to perform the job.