Ella 
USD/CHF rose for a third consecutive day in Asia on Friday, rising to around 0.8850. Strong US producer price index boosted USD/CHF strength.
In addition, the U.S. dollar index (DXY) benefited from the hawkish bias of the Federal Reserve, which is considering maintaining higher interest rates in response to continued inflationary pressures. In addition, U.S. bond yields have risen continuously over the past four trading days, providing further support to the U.S. dollar (USD), thus boosting USD/CHF.
U.S. core producer prices were steady in February, rising 2.0% on an annual basis, beating expectations for a 1.9% increase. The U.S. producer price index came in at an annual rate of 1.6%, beating expectations of 1.1% and the previous reading of 1.0%. Additionally, the retail sales control group also improved and was flat at 0.0% from -0.3% previously.
These recent economic indicators complicate the Fed’s decision-making process for cutting interest rates. The odds of a Fed rate cut in March are now just 1.0%, falling to 7.7% in May, according to the CME FedWatch Tool. The probability of a rate cut in June and July is relatively low, at 59.0% and 79.4% respectively.
Swiss producer and import prices were -2.0% annualized in February 2024, up slightly from -2.3% the previous month, which recorded the largest fall since December 2020. This is also the tenth consecutive month that Swiss producer and import prices have fallen. Swiss producer and import prices recorded a monthly rate of 0.1%, recovering from -0.5% last month.
The Swiss franc faces challenges as the Swiss National Bank (SNB) adjusts its policy stance and de-prioritizes a strong local currency. Thomas Jordan, chairman of the Swiss National Bank, expressed concern about the excessive strength of the Swiss franc, especially its impact on Swiss companies, especially exporters. Swiss Foreign Exchange Reserve (CHFER) data showed a rebound in foreign exchange reserves, reflecting these concerns.
