- USD/CHF consolidates in a 20-pips range after a juggernaut upside move.
- Fed-SNB policy stance diversion underpinned the greenback against the Swiss franc.
- Investors expect more than one 50-bps rate hike by the Fed this year.
The USD/CHF pair is witnessing back and forth moves in early Tokyo in a range of 0.9555-0.9575. The asset has been scaling higher right from the first tick in April on progressing odds of a jumbo rate hike by the Federal Reserve (Fed) in its upcoming monetary policy meeting, while the Swiss National Bank (SNB) will stick with its ultra-loose monetary policy due to lower aggregate demand.
Inflation is sky-rocketing in the US economy. It won’t be wrong to say that the economy is entering into a prolonged hawkish environment where interest rates will continue to elevate and balance sheet size will be reduced drastically to squeeze liquidity from the market. For the certainty of the liquidity squeeze, investors should brace more than one 50 basis points (bps) interest rate hike by the Federal Reserve (Fed) this year. Also, the Fed will do the strategic decision-making to return to neutral rates sooner rather than later.
On the Swiss franc front, investors are focusing on the speech from SNB Governor Thomas J. Jordan, which is due on Friday. This will provide insights into the likely monetary policy action by the SNB in its upcoming monetary policy meeting. Meanwhile, investors have shrugged off Swiss’s 13-year high inflation print at 2.2%.
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