The USD/CHF pair comes under heavy selling pressure on Thursday, extending the previous day’s late pullback from a one-week high, around the 0.9000 psychological mark. The pair maintains its offered tone through the first half of the European session and is currently placed around the 0.8940 regions, near the lower end of its weekly trading range.
A generally weaker tone around the equity markets – amid worries about economic headwinds from rising borrowing costs – benefits the safe-haven Swiss Franc (CHF). The anti-risk flow, meanwhile, triggers a sharp intraday downfall in the US Treasury bond yields, which keeps the US Dollar (USD) bulls on the defensive and contributes to the offered tone surrounding the USD/CHF pair.
However, any meaningful downside for the USD seems limited amid growing acceptance that the Federal Reserve (Fed) will continue raising interest rates. The markets seem convinced that the US central bank will hike rates by 25 bps in May and have been pricing in a slight chance of another lift-off in June. This should act as a tailwind for the US bond yields and help revive the USD demand.
The aforementioned fundamental backdrop, meanwhile, warrants caution before positioning for any further depreciating move. Now look to the US economic docket, featuring Weekly Initial Jobless Claim, the Philly Fed Manufacturing Index and Existing Home Sales data. This, along with speeches by Fedspeaks and the US bond yields, will drive the USD demand and provide some impetus to the USD/CHF pair.
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