USD/CHF pulls back to near 0.8810 on improved Swiss Trade Surplus, subdued US Dollar

• USD/CHF snaps its recent gains on a weaker US Dollar on Tuesday.
• Swiss Trade Balance came in at 4,738 million in January against December’s figure of 1,271 million.
• The US Fed is expected to avoid rate cuts in March and May on persistent consumer and producer prices.

USD/CHF breaks the two days of advances as the risk sentiment improves after the positive Swiss Trade Balance figures reported on Tuesday. The report showed a trade surplus of 4,738 million in January, which is higher than December’s figure of 1,271 million. The USD/CHF pair edges lower to near 0.8810 during the European session on Tuesday.

Moreover, Swiss Exports (MoM) improved to 22,804 million in January from the previous export figure of 18,788. While Imports (MoM) also rose to 18,067 million from the previous figure of 17,517 million. Furthermore, the Employment Level for the fourth quarter will be released on Friday.

Additionally, the weaker US Dollar (USD) is contributing to the downward pressure for the USD/CHF pair, which could be attributed to the decline in the US Treasury yields. However, the Greenback attempted to halt its losing streak on the risk aversion sentiment due to the fading possibility of interest rate cuts by the Federal Reserve at upcoming meetings in March and May.

The US Dollar Index (DXY) extends its losing streak for the fifth successive session trading lower around 104.10 with 2-year and 10-year yields on US bond coupons standing at 4.61% and 4.27%, respectively, by the press time.

Last week’s data showed that consumer and producer prices remain higher in the United States (US), which could possibly prevent the Federal Reserve from loosening the policy tightening sooner. Moreover, ANZ expects that the Federal Reserve (Fed) will initiate rate cuts starting from July 2024.

According to the CME FedWatch Tool, there is a 53% possibility of a 25 basis points rate cut by the US Fed in the June meeting. Traders will likely observe the Federal Open Market Committee’s (FOMC) minutes for the January meeting scheduled for Wednesday.