USD/CHF eases around 0.9300 as market consolidates despite hawkish Fed, geopolitical fears

USD/CHF renews its intraday low near 0.9305 as it pares the recent gains around the weekly top during Thursday’s sluggish session. The Swiss currency pair’s latest pullback could be linked to the market’s adjustments of the latest moves amid the Japan holidays and a pullback in the US Treasury bond yields.

The underlying reason could be linked to the comments from US President Joe Biden as he thinks that his Russian counterpart isn’t up to using nuclear arms by backing off an international treaty. However, the fears surrounding the Ukraine-Russia war are far from over, with the latest edition of the West and China escalating the matter to the worse. That said, the Wall Street Journal (WSJ) recently said that the US is considering the release of intelligence on China’s potential arms transfer to Russia. Previously, the China-Russia ties seemed to have escalated the geopolitical woes as the US strongly criticized such moves and favored the rush towards risk safety, which in turn favored the US Dollar.

Also likely to have favored the USD/CHF pullback is the latest retreat in the US inflation expectations. That said, the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) signal a pullback in the US inflation expectations by retreating from the multi-day top.

Furthermore, the first daily negative of the US benchmark Treasury bond yields and mixed Wall Street close also allowed the US Dollar Index (DXY) to pare recent gains and weigh on the USD/CHF prices.

It’s worth noting that the latest Federal Open Market Committee’s (FOMC) Monetary Policy Meeting Minutes stated that all participants agreed more rate hikes are needed to achieve the inflation target while also favoring further Fed balance sheet reductions, which in turn favored DXY bulls. On the same line, St. Louis Federal Reserve President James Bullard also mentioned that the Fed will have to go north of 5% to tame inflation, as reported by Reuters. The policymaker also stated that he believes there are good chances they could beat inflation this year without creating a recession. Additionally, Federal Reserve Bank of New York President John Williams highlighted the concerns favoring the Fed’s higher rates by saying, per Reuters, “Fed is absolutely committed to getting inflation back to 2%.”

Looking ahead, second estimations of the US Personal Consumption Expenditures (PCE) details for the fourth quarter (Q4), as well as the preliminary readings of the US Q4 Gross Domestic Product (GDP), will be important for fresh directions to the USD/CHF traders.

Technical analysis

Despite the latest retreat, USD/CHF remains well above the 50-day Exponential Moving Average (EMA) support surrounding 0.9285, which in turn suggests more chances of its further run-up towards the previous monthly high of 0.9410.