USD/CHF approaches the vicinity of 0.8790, due to resilient inflation in the United States

• USD/CHF appreciates for the second day on upbeat US CPI figures.
• CME FedWatch Tool indicates expectations for a rate cut in July have surged to 84.2%.
• Swiss Franc encounters challenges as the SNB shifts its stance on the strength of CHF.

USD/CHF continues to strengthen for the second consecutive day during Thursday's Asian session, inching closer to 0.8790. The pair's appreciation is fueled by a stronger US Dollar (USD) supported by higher US Treasury yields, possibly driven by recent data on “resilient inflation” from the United States (US).

The upbeat US Consumer Price Index (CPI) has tempered expectations for near-term interest rate cuts by the Federal Reserve (Fed). However, market sentiment still leans towards a rate reduction in June, with a likelihood of 67.2%, according to the CME FedWatch Tool. Moreover, expectations for a rate cut in July have surged to 84.2%.

US Treasury Secretary Janet Louise Yellen remarked that it appears unlikely for interest rates to revert to levels as low as those before the Covid-19 pandemic. She also noted that the interest rate assumptions outlined in President Biden's budget plan were deemed "reasonable" and aligned with a broad spectrum of forecasts.

On the other side, the Swiss Franc (CHF) encounters challenges as the Swiss National Bank (SNB) shifts its stance, no longer aiming to promote a strong domestic currency. Moreover, the prevailing risk-on sentiment exerts downward pressure on the Swiss Franc, traditionally considered a safe haven currency.

SNB Chairman Thomas Jordan expressed concerns about the Swiss Franc's excessive strength, particularly for Swiss businesses, especially exporters. His remarks align with data from Switzerland's Foreign Exchange Reserves (CHFER), indicating a recovery in Forex reserves. This suggests that the SNB may be selling Swiss Francs to purchase other currencies, aiming to mitigate the CHF's appreciation.

Meanwhile, the consumer confidence indicator in Switzerland continued its decline, reaching -42.3 in February from January's -41.1. This downward trend reflects heightened concerns regarding personal financial situations and the overall economy in the coming months compared to the previous period. Thursday will see the release of Producer and Import Prices for February, offering further insights into Switzerland's economic landscape.