USD/CHF consolidates around 0.8790 post recent gains, focus on US PCE data

USD/CHF moves sideways amid a tepid US Dollar (USD) despite improved US Treasury yields. The pair hovers around 0.8790 during the Asian trading hours on Thursday. The US Dollar Index (DXY) edges lower to near 103.90 with 2-year and 10-year yields on US Treasury coupons standing at 4.65% and 4.28%, respectively, by the press time.

The preliminary US Gross Domestic Product Annualized (Q4) rose by 3.2%, against the expected 3.3%. Additionally, the preliminary US Gross Domestic Product Price Index (Q4) increased by 1.7%, surpassing both expected and previous rises of 1.5%. These figures have led financial markets to delay expectations for the Federal Reserve’s (Fed) first rate cut, providing some support to the US Dollar (USD).

According to the CME FedWatch Tool, the odds for rate cuts in March are at 3.0%, with probabilities decreasing to 19.3% in May and increasing to 52.6% in June. New York Federal Reserve (Fed) President John Williams stated on Wednesday that while there is still progress to be made in reaching the Fed's 2% inflation target, the possibility of interest rate cuts this year remains on the table, contingent upon incoming data. Traders are eagerly awaiting the release of key US Personal Consumption Expenditures - Price Index data, which could potentially influence the Federal Reserve's monetary policy stance.

On the Swiss side, the ZEW Survey – Expectations indicated improved business conditions for February, with a reading of 10.2, up from the previous drop to 19.5. Additionally, support stemmed from expectations of lower interest rates by the Swiss National Bank (SNB) in the second half of the year. Moreover, investors are anticipating the Gross Domestic Product (GDP) data by the Swiss State Secretariat for Economic Affairs (SECO) on Thursday, which is expected to report a decline in the fourth quarter of 2023.