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USD/CHF rises to near 0.8680, SNB Chairman concerns about appreciated Swiss Franc

  • USD/CHF continues to gain ground after nervous comments from the SNB Chairman.
  • SNB Chairman Thomas Jordan is concerned that excessive appreciation of CHF could drive inflation below zero.
  • US Dollar gained ground on the diminished possibility of Fed rate cuts in March.

USD/CHF seems to continue its winning streak that began on January 11. On Thursday, Swiss National Bank (SNB) Chairman Thomas Jordan issued a warning about the Swiss Franc's (CHF) appreciating trend. Jordan expressed concerns at the World Economic Forum (WEF) in Davos about its potential impact on the SNB's ability to maintain inflation above zero in the Swiss domestic economy. These remarks have contributed to the USD/CHF pair's upward trajectory, with trading slightly higher around 0.8680 during the Asian session on Friday.

As the Swiss Franc experienced rapid appreciation towards the end of 2023, the SNB is sounding the alarm, emphasizing that excessive appreciation could pose a threat to the Swiss economy. A strengthening CHF has the potential to drive inflation lower swiftly. Market participants await Swiss Producer and Import Prices to gain further impetus on consumer price inflation in Switzerland.

The US Dollar Index (DXY) remains steady after recent gains with a positive bias to continue its winning streak on the back of upbeat US Treasury yields. The DXY hovers around 103.40 with the 2-year and 10-year yields on US bond coupons standing at 4.36% and 4.16%, respectively, at the time of writing.

On Thursday, positive economic indicators from the United States (US) provided further support to the upward momentum of the US Dollar, diminishing the likelihood of early interest rate cuts by the Federal Reserve (Fed) in March. In addition to the economic data, Federal Reserve Bank of Atlanta President Raphael Bostic made statements on Thursday during an event at the Atlanta Chamber of Commerce. Bostic noted that the base case for the Fed is to consider rate cuts in the third quarter, but he also kept the possibility open for earlier initiation of the rate cut cycle, contingent on inflation figures.

Traders are anticipated to closely monitor the US preliminary Michigan Consumer Sentiment Index, with expectations of improvement in January, as it may provide further insights into the market sentiment and the potential trajectory of the Fed’s monetary policy.

 

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