USD/CHF improves to five-month high at 0.9150, awaits slew of US data

• USD/CHF extends the gains to a five-month high amid market caution ahead of US data.
• US bond yields are improved due to the Fed’s hawkish stance, strengthening the US Dollar (USD).
• SNB’s surprising decision to halt the rate-hiking cycle weakened the Swiss Franc (CHF).

USD/CHF continues the winning streak that began on September 19 and reached the five-month high. The spot price is trading near 0.9140 during the early trading hours of the European session on Tuesday.

Market caution and upbeat US Treasury yields are underpinning the strength of the pair. US Federal Reserve’s (Fed) hawkish stance on interest rate trajectory keeps pushing the US Treasury yields, which is boosting the US Dollar (USD).

The US Dollar Index (DXY) continues to trade higher around 106.10 by the press time. The yield on the 10-year US Treasury note hovers near 4.55%, the highest level since October 2007.

However, the warnings from US President Joe Biden and a senior adviser regarding the potential consequences of a federal government shutdown have heightened market concerns. They have emphasized the potential difficulties that could arise, particularly affecting low-income women and children who may lose food benefits.

While there was an agreement between President Biden and House Speaker Kevin McCarthy on government spending levels, the Republican-controlled House of Representatives may attempt to push through substantial budget cuts this week.

These proposed cuts would need approval from the Democratic-controlled Senate, which is expected to reject them. The failure to reach an agreement between both houses could lead to a partial government shutdown by the upcoming Sunday.

Investors will likely watch key macro releases later in the week, including US Consumer Confidence, Durable Goods Orders, Initial Jobless Claims, and the Core Personal Consumption Expenditures (PCE) Price Index, which is the Federal Reserve's preferred measure of inflation.

These key events will provide important insights into inflationary pressures in the US economy and could influence trading decisions involving the US Dollar.

On the Swiss side, the Swiss National Bank (SNB) has made a surprising decision to halt its rate-hiking cycle, a move that contrasts with its previous actions since March 2022. The central bank's decision is attributed to the observation that inflation has subsided. As a result, this decision is putting pressure on the Swiss Franc (CHF).

Swiss data ZEW Survey – Expectations and SNB Quarterly Bulletin will be eyed by the investors to gain further cues on Switzerland’s economic situation and business trends in this quarter.