USD/CHF inches higher to around 0.8810 ahead of the US economic data

• USD/CHF gains ground amid stronger US Dollar ahead of US PMI data.
• The Greenback improves as risk-off mood prevails despite weaker US Retail Sales.
• Scotiabank expects the SNB to reduce interest rates during 2024.

USD/CHF recovers its recent losses on a stronger US Dollar (USD), which could be attributed to the risk-off sentiment. Additionally, improved US Treasury yields are supporting the Greenback to hold ground, which in turn, underpins the USD/CHF pair. The pair edges higher to around 0.8810 during the European session on Friday.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against the six other major currencies, edges higher to near 104.30. 2-year and 10-year yields on US bond coupons stand higher at 4.60% and 4.26%, respectively, by the press time. Furthermore, investors await the Producer Price Index (PPI) data and Michigan Consumer Sentiment Index scheduled to be released later in the North American session on Friday.

On Thursday, the mixed economic data from the United States put downward pressure on the Greenback, which in turn, undermined the USD/CHF pair. US Retail Sales (MoM) reported a decline in January against the expected decline. While Retail Sales Control Group decreased against the December’s increase.

According to the Scotiabank, Swiss Franc (CHF) may underperform moderately in 2024. Economists at Scotiabank expect some easing in the Swiss National Bank’s (SNB) interest rates trajectory. The market may witness a modest correction in the CHF’s somewhat overvalued status.

On Friday, Swiss Statistics released Industrial Production (YoY) report for the fourth quarter of 2023. The data showed a decline of 0.4% in the production of factories and manufacturing. These figures along with slowed Swiss consumer prices could have contributed to downward pressure on the Swiss Franc.