- USD/CHF is printing modest gains after a two-day losing streak, recently moving higher.
- Market sentiment is easing as the UBS-Credit Suisse deal struggles to please traders amid fears of further banking fallout.
- A 0.25% Fed rate hike seems a given, but the SNB may surprise markets.
- March PMI preliminary data, headlines in the bakery sector also seem important for fresh momentum.
USD/CHF is struggling to defend its first of three daily gains as it hovers around 0.9270 during Monday morning Asia. It should be noted that the Swiss Franc (CHF) pair recorded its first weekly gain in the last three, even as the US Dollar posted extensive losses.
The reason could be related to speculation that the Swiss National Bank (SNB) will refrain from tightening monetary policy measures as part of the latest Credit Suisse shortfall. However, news that UBS is poised to buy troubled Credit Suisse also offered some relief to market sentiment and helped US Treasury yields recover, which in turn allows USD/CHF to bid slightly.
Conversely, news shared by Reuters indicating that two more banks are struggling in Europe also seemed to favor bulls in USD/CHF. In the same line, the cautious mood of the market could be before the key monetary policy meeting of the US central bank (Fed) and the Swiss National Bank (SNB).
The collapse of the banking sector last week drowned market sentiment, but the US dollar and Swiss franc had to fall due to low government bond yields as well as the SNB’s role in defending Credit Suisse. It should be noted that weaker US data added to the strength of the dollar in the previous week to the south.
During the past week, the American consumer Price index (CPI) for February was in line with 6.0% yoy market expectation vs. 6.4% previously, while retail sales also posted -0.4% yoy vs. -0.3% expected and 3.2% prior. Further, US consumer confidence fell to 63.4 in March from the expected and previous 67.0, according to the University of Michigan (UoM) consumer confidence index. The details indicated that annual inflation expectations fell to 3.8% from 4.1% in February, the lowest since April 2021, while the 5-year counterpart fell to 2.8% from 2.9% in the previous reading. Additionally, US industrial production was unchanged in February from an expected 0.2% and January expansion of 0.3% (revised from 0%).
Against this backdrop, Wall Street closed with losses and US two-year Treasury yields fell the most in three years.
A light calendar could limit USD/CHF moves on Monday, but bulls are likely to hold the reins in hopes that SNB may cite the impact of the banking sector to disappoint markets. This means that Fed It is expected to announce a 0.25% rate hike, while the SNB expects another 0.50% hike in its base rate at its upcoming monetary policy meetings on Wednesday and Thursday.
Technical analysis
Sustained bounces from the 50-DMA, most recently near 0.9260, could help USD/CHF challenge the week-old descending resistance line, around 0.9295 at press time.
