USD/CHF holds positive ground near 0.8950 as Fed’s hawkish stance supports US Dollar

• USD/CHF rebounds near  0.8940 in Friday’s early European session. 
• The US PPI figure was weaker than expected, but the hawkish Fed projection capped the pair’s downside. 
• The Swiss Producer and Import Prices dropped 0.3% MoM in May from a 0.6% rise in April, below the consensus. 

The USD/CHF pair snaps the two-day losing streak near 0.8940 in Friday’s early European session. The recovery of the pair is bolstered by the stronger Greenback as the hawkish Fed projection suggested only one rate cut is likely in 2024. Investors await the preliminary US Michigan Consumer Sentiment report and the Fed Bank of Chicago President Austan Goolsbee's speech on Friday for fresh impetus. 

On Thursday, the US Producer Price Index (PPI) rose 2.2% YoY in May, compared to the 2.3% increase in April (revised from 2.2%), below the market expectation of 2.5%. Meanwhile, the core PPI figure climbed 2.3% YoY in May, below the estimation and previous reading of 2.4%. Despite the weaker US economic data, the hawkish stance of the US Fed provides some support to the Greenback and caps the downside for the pair. 

According to the dot plot, the US Fed signaled that it will cut its key interest rate just once by 25 basis points (bps) toward the end of 2024. The new projection emerged after the US central bank decided to hold interest rates at their current 23-year high even as inflation ticked lower.

On the Swiss front, the Federal Statistical Office of Switzerland reported on Thursday that the nation’s Producer and Import Prices dropped 0.3% MoM in May from a 0.6% rise in April, worse than expectations of a 0.5% increase. Apart from this, the markets expect the Swiss National Bank (SNB) to hold interest rates in June, which is likely to lift the Swiss Franc (CHF). Additionally, the uncertainty and ongoing geopolitical tensions in the Middle East might boost safe-haven flows, benefiting the CHF for the time being.