USD/CHF looks vulnerable above 0.8980 as Fed delivers dovish interest rate guidance
|- USD/CHF is facing pressure above 0.8980 as Fed believes that US tight credit conditions are weighing on US inflation.
- US equities witnessed a sell-off as US President Joe Biden called partisan terms from Republican leaders unacceptable.
- Rising fears of US default are strengthening the US Treasury yields.
The USD/CHF pair is struggling in holding its auction above the immediate support of 0.8980 in the early Asian session. The Swiss Franc asset has retreated after a pullback move to near the psychological resistance of 0.9000.
S&P500 futures have trimmed some losses posted in early Asia, however, the risk aversion theme is still solid amid uncertainty over United States debt-ceiling talks. US equities witnessed a sell-off on Friday as US President Joe Biden called partisan terms from Republican leaders unacceptable. A big cut of 8% on overall spending initiatives in the budget by the White House is not acceptable to Democrats.
US Biden called that Republicans want to prevent them from winning re-election in 2024. The White House is ready to cut average spending of 22% on education and law enforcement, however, a hefty 8% cut on overall spending is huge. Meanwhile, US Treasury Secretary Janet Yellen is continuously reiterating the need for a US debt-ceiling raise to avoid default on obligated payments on June 01.
The US Dollar Index (DXY) is looking to test Friday’s low around 103.00 as the Federal Reserve (Fed) is expected to keep the interest rate policy steady. Fed chair Jerome Powell cited on Friday that tight credit conditions by United States regional banks to avoid any calamity on their assets have trimmed the need for more interest rates for now.
Rising fears of US default is strengthening the US Treasury yields. The yields offered on 10-year US government bonds have jumped above 3.69%.
On the Swiss Franc front, Q1 Industrial Production data will be keenly watched. Earlier, the economic data landed at 6.1%. Inflationary pressures in the Swiss economy have softened amid increasing interest rates by the Swiss National Bank (SNB). Later this week, Swiss Employment Level data will be keenly watched.
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