USD/CHF coils below 0.9250 on fading Fed’s USD gains

  • USD/CHF trades modestly higher on Friday in the early Asian trading hours. 
  • US Dollar Index trades below one-month highs near 93.00.
  • Risk-on sentiment, the divergence of SNB from its peers weighs on the Swiss franc.

The USD/CHF pair prints minute gains on the last trading day of the week. The pair remained unfazed by the Fed’s policy update and SNB’s interest rate decision and continued to trade in a broader trading range of 0.9210-0.9280 for the previous four sessions. At the time of writing, USD/CHF is trading at 0.9244, up 0.04% for the day.

The movement is primarily sponsored by the intense selling pressure in the greenback in the US session. The US Dollar Index (DXY), which measures the performance of the greenback against the basket of six major currencies, fell from a one-month high and traded near 93.00 as investors digested Federal Reserve Open Committee (FOMC) policy update.

The US Federal Reserve kept its short term key rates unchanged in the range of 0% to 0.25% in its recent monetary policy announcement. The Federal Open Market Committee’s  (FOMC) projections pointed at slower economic growth than previously anticipated this year. The US Gross Domestic Product (GDP) is expected to grow 5.9% in 2021 compared to a rise of 7% in June. Nevertheless, the forecast for 2023 has been upgraded from a 0.6% projection in June to 1%.

In addition to that, Fed Chair Jerome Powell remained cleared on his stance of delaying the interest rate hike until 2022. He said the timing and pace of tapering could not be taken as a direct signal regarding the timing of interest-rate liftoff.

Furthermore, downbeat US economic data too weighed on the US dollar. The US Initial Jobless Claims rose to 351K on the week ending on September 18 for the second straight week coupled with Markit Purchase Managers Index (PMI) pointed to a slowdown in both services and manufacturing in September.

Meanwhile, the US Senate Majority Leader Chuck Schumer and House of Representatives Speaker Nancy Pelosi announced that they had reached a deal to pay for the US President Joe Biden sweeping social agenda but provided no details on how they would pay for the proposed $3.5 trillion infrastructure bill.

On the other hand, the Swiss franc remains on the back foot on the improved risk sentiment as the market digested China’s property giant Evergrande default risk. China’s central bank injected $17 billion into the financial system amid Evergrande concerns. Meanwhile, the market remained unfazed by the Swiss National Bank (SNB) no show on Thursday. SNB maintained the key sight deposit rate steady at 0.75% as widely expected.

As for now, traders are bracing up for  German IFO Business Climate Data, US Fed Official’s speeches, and New Home Sales data to take fresh trading impetus.

 

FX

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