USD/CHF surrenders 0.9160 as Fed policy misses hawkish guidance, SNB policy eyed

The USD/CHF pair has slipped below the immediate support of 0.9160 in the Asian session. The Swiss franc asset has retreated after a recovery attempt to near 0.9180 as the commentary from Federal Reserve (Fed) chair Jerome Powell in his monetary policy statement indicates that the central bank is close to reaching the terminal rate.

After hiking interest rates by 25 basis points (bps) consecutively to 4.75-5.00%, Fed Powell remained softer on interest rate guidance citing “some additional policy firming may be appropriate”.

Dovish guidance on interest rates has weighed heavily on the US Dollar Index (DXY). The USD Index has dropped after a short-lived recovery and is expected to continue its downside journey.

S&P500 futures are showing some gains after a sell-off on Wednesday, however, the appeal for US equities is still weak. Investors seem dissatisfied from US Treasury Secretary Janet Yellen's commentary that the government "is not considering insuring all uninsured bank deposits," The rollback of assurance has receded confidence among investors.

Meanwhile, the demand for US government bonds has soared as tight credit conditions from the banks for households and businesses after the collapse of Silicon Valley Bank (SVB) and Signature Bank would result in cooling demand and inflation.

Thursday’s session is going to remain extremely volatile as investors are awaiting the interest rate decision from the Swiss National Bank (SNB). Analysts from ING cited “Our baseline scenario remains a 50 bps rate hike, but the probability of this has seriously diminished, and neither the status quo nor a 25 bps hike can be ruled out. Unlike the ECB, the SNB has not pre-announced anything, so it is freer in its choices.”

The decision is likely to be incredibly difficult for SNB Chairman Thomas J. Jordan, which is still managing the Credit Suisse mess.