USD/CHF rebounds above 0.8950 but still need to pass more filters ahead of US debt-ceiling issues

• USD/CHF has shown a recovery move to near 0.8950 despite a consistent decline in the USD Index.
• The overall market mood is still cheerful as the Fed is expected to pause its policy-tightening spell.
• US Retail Sales data is expected to show an expansion of 0.7% against a contraction of 0.6%, recorded for March.

The USD/CHF pair has attempted a recovery after correcting to near 0.8940 in the early Asian session. The Swiss franc asset is required to pass more filters for building confidence among investors. The US Dollar Index (DXY) has not shown an n recovery action yet but is looking vulnerable above the immediate support of 102.40.

S&P500 futures are showing nominal losses in early Asia, portraying signs of caution ahead of US debt ceiling negotiations between congressional Republicans and US President Joe Biden. The overall market mood is still cheerful as the Federal Reserve (Fed) is expected to pause its policy tightening spell to avoid further damage to the economy.

The USD Index is expected to remain in action as the release of the United States Retail Sales (April) data will provide further guidance for June’s monetary policy. As per the consensus, monthly Retail Sales data are showing some recovery. The economic data is expected to show an expansion of 0.7% against a contraction of 0.6%, recorded for March.

Apart from that, US debt-ceiling talks will remain in the spotlight. A raise in debt-ceiling limit is highly required to save US Treasury from reporting default in making obligated payments. Economists at ANZ Bank believe that a deal will be reached to suspend the debt limit for a few months to provide more time to negotiate a mutually satisfactory outcome. Negotiations over that period are likely to be fractious, causing financial market volatility and disrupting growth.”

On the Swiss franc front, monthly Producer and Import Prices data accelerated by 0.2% in line with the prior release while the street was anticipating a contraction by 0.1%. On an annual basis, the economic data softened to 1.0% vs. the estimates of 1.1% and the former release of 2.1%. Consistency in the increase in offered prices for end consumers could force the Swiss National Bank (SNB) to remain hawkish ahead.