The USD/CHF pair is inching lower towards 0.8480 during the European trading hours on Tuesday. This downward movement can be attributed to the US Dollar (USD) trimming its intraday gains, possibly influenced by improved risk sentiment. However, the Greenback is finding support from the uptick in US Treasury yields.
The US Dollar Index (DXY), which measures the USD against six major currencies, is holding onto minor gains for the third consecutive day, hovering around 101.70. The 2-year and 10-year US Treasury bond yields are currently at 3.69% and 3.72%, respectively.
Furthermore, the recent US labor market report has created uncertainty regarding the possibility of a significant interest rate cut by the Federal Reserve (Fed) at its September meeting. The markets are currently pricing in at least a 25 basis point rate cut, with a 29.0% chance of a 50 bps cut.
In Switzerland, traders are keeping a close eye on any speeches from Swiss National Bank (SNB) members this week, as there are no major economic releases scheduled. Recent data showing Swiss Foreign Currency Reserves declining suggests ongoing intervention by the SNB to support the Swiss Franc (CHF).
Analysis:
The USD/CHF pair is facing downward pressure as market participants exercise caution ahead of the US CPI data release. The US Dollar’s gains are being limited by improved risk sentiment, while the uptick in US Treasury yields is providing some support. In Switzerland, the SNB’s intervention to support the CHF is evident from the decline in Foreign Currency Reserves. Traders should monitor upcoming speeches from SNB members and be prepared for potential market volatility.