- USD/CHF is holding itself around 0.9550 and is expected to extend its recovery.
- Fed’s commitment to bringing price stability is supporting one more 75 bps rate hike.
- Lower Swiss ZEW Survey- Expectations have weakened the Swiss franc.
The USD/CHF pair is attempting to hold itself around 0.9550 after a responsive buying action on Wednesday. The asset witnessed a firmer rebound after slipping minutely below the psychological support of 0.9500. A responsive buying action indicates that the market participants found the asset a value buy and initiated fresh longs on the counter.
Considering the firmer fundamentals, bids will remain in favor of the greenback as the market participants have started bracing for a consecutive 75 basis point (bps) rate hike by the Federal Reserve (Fed) in July. The Fed is committed to bringing price stability to the US economy and the concept will demand a significant pace in hiking interest rates.
The commentary from Fed chair Jerome Powell in European Central Bank (ECB)'s annual Forum on Central Banking that delighted investors is that the US economy is strong enough and the labor market is so tight that they could bear the consequences of stepping up rates at a much faster pace. However, the issue with the rapid rate hiking process is that there is no guarantee that the interest rates will reverse to the targeted rate. Therefore, the market participants should start establishing in their subconscious mind that higher inflation for a prolonged period is for real now.
On the Swiss franc front, the underperformance from the ZEW Survey- Expectations have weakened the Swiss franc. The economic data landed at -72.7, lower than the expectations and the prior print of -70.7 and -52.6 respectively. Going forward, investors will keep an eye on the Real Retail Sales, which are seen at 3.8%, significantly higher than the prior release of -6%.
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