- USD/CHF is mildly offered after failing to sustain above the psychological resistance of 0.9800.
- Higher price pressures will force the Fed to squeeze more liquidity from the market.
- Next week, the SNB will dictate its June monetary policy.
The USD/CHF pair has modestly slipped to near 0.9786 after failing to sustain above the psychological resistance of 0.9800. An upside bias is still intact as investors are awaiting the release of the US Inflation.
As per the market consensus, the US Consumer Price Index (CPI) is seen at 8.3% on annual basis, similar to the prior print. While the core CPI that doesn’t include food and oil prices is seen lower at 5.9% against the former figure of 6.2%. This dictates that higher fossil fuel and food prices are majorly responsible for elevated inflation levels.
Investors are cautious over the fact that despite the adaptation of policy tightening measures by the Federal Reserve (Fed), the expectations for the inflation rate have not been trimmed. A stable inflation rate is advocating more quantitative restrictions and more filters on liquidity leakage into the economy, which will diminish the growth forecasts as the corporate sector will use more filters while doing an investment.
Meanwhile, higher price pressures have brought a rebound in the US dollar index (DXY). After a minor correction, the DXY is resuming its upside journey and is expected to recapture its three-week high at 103.37.
On the Swiss franc front, investors are awaiting the interest rate decision by the Swiss National Bank (SNB) next week. The Swiss CPI has climbed above 2% in May, which could pause the SNB to continue with a neutral stance. However, a report from Citibank states that the Swiss central bank could raise interest rates next week”.
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