USD/CHF slides towards 0.9100 despite softer Swiss inflation on SNB, Fed talks

• USD/CHF holds lower grounds after downbeat start to the NFP week.
• Swiss inflation came in softer but SNB’s Schlegel sounds hawkish.
• Fed’s Cook fail to gain accolades for hawkish remarks on softer data, downbeat interest rate futures.
• Risk catalysts are crucial for clear directions amid a light calendar for the day.

USD/CHF remains pressured around 0.9125, following a downbeat start to the key week, as bears struggle to keep the reins amid a light calendar on Tuesday. Even so, the broad US Dollar weakness joins receding hawkish Fed bets and downbeat US data to weigh on the Swiss currency pair. With this, the quote ignores downbeat Swiss inflation and activity data.

On Monday, the Swiss Consumer Price Index (CPI) for March dropped to 0.2% MoM versus 0.4% expected and 0.7% prior while the YoY figures eased to 2.9% from 3.4% previous readings and 3.2% market consensus. Further, SVME Purchasing Managers’ Index (PMI) for March also eased to 47 from 48.9 initial forecasts.

On the other hand, the US ISM Manufacturing PMI dropped to the lowest levels since May 2020 in March, to 46.3 versus 47.5 expected and 47.7 prior. On the same line, the final readings of March’s S&P Global Manufacturing PMI eased to 49.2 compared to 49.3 initial estimations.

Softer US PMIs joined the market’s lack of inflation fears from the OPEC+ supply cuts and the resulting Oil price run-up to weigh on the yields. With this, the CME’s FedWatch Tool marked nearly 43% market bets on the Fed’s 0.25% rate hike in May, versus 52% expected on Friday.

Elsewhere, Swiss National Bank (SNB) Vice Chairman Martin Schlegel told Swiss broadcaster SRF in an interview broadcast on Monday that they will do everything it can to bring inflation down. The policymaker also added that he can't make any forecasts while adding, “But you can see our inflation forecasts are higher now than they were in December," he told SRF. "That means, that if necessary we will continue to raise interest rates."

It should be noted that US Federal Reserve Board Governor Lisa Cook also spoke on Monday and tried to defend the Fed’s hawkish bias by saying that the US has low unemployment and high inflation. Thus the Fed is focused on inflation at present and the disinflationary process is underway but we are not there yet. 

Against this backdrop, Wall Street closed mixed and the yields were down while the US Dollar Index (DXY) dropped the most in a fortnight the previous day to test the lowest levels in two months.

Looking forward, a light calendar may allow the Cable pair to remain firmer for the day. However, Wednesday’s US ADP Employment Change, ISM Services PMI and Friday’s US Nonfarm Payrolls (NFP) are the keys for the GBP/USD pair traders to watch for clear directions.

Technical analysis

A daily closing below 0.9120 becomes necessary for the USD/CHF bears to approach a two-month-old ascending support line, close to 0.9080 at the latest. Alternatively, recovery remains elusive below a downward-sloping resistance line from early March, close to 0.9180.