USD/CHF prepares for a break above 0.9850 as DXY rebounds amid a vulnerable market mood

• USD/CHF is eyeing a break above 0.9850 as a risk-off market mood soars.

• The DXY is expected to recapture a fresh two-decade high at 114.52 on upbeat PMI numbers.

• SNB’s 75 bps rate hike failed to support the Swiss franc bulls.

The USD/CHF pair is hovering around the immediate hurdle of 0.9860 in the Tokyo session as a pullback towards 0.9755 has concluded and upside momentum has resumed. The asset is preparing for a break above 0.9850 as the US dollar index (DXY) has rebounded firmly after a minute drop to near 113.62.

The DXY is expected to recapture its fresh two-decade high at 114.52 as the market mood is turning vulnerable to Russia’s nuclear attack warning and soaring odds of a global recession. In retaliation to western sanctions, Russian leader Vladimir Putin has warned of a nuclear attack, which has spooked the market sentiment and has forced market participants to channel liquidity into the DXY.

Apart from that, mixed PMI numbers from global countries have soared the odds of a global recession. A mix of higher inflation and accelerating interest rates is forcing institutional investors to drop their growth forecasts for western leaders. Meanwhile, S&P Global PMI numbers for the US economy remained firmer. The Manufacturing PMI landed at 51.8 vs. The consensus of 51.1. While, the Services PMI remained upbeat, the data released at 49.4, significantly higher than the estimates of 45.0.

On the Swiss franc front, a hawkish stance on interest rates by the Swiss National Bank (SNB) failed to support the Swiss franc bulls. SNB Chairman Thomas J. Jordan announced a rate hike by 75 basis points (bps). It is worth noting that the SNB organizes monetary policy once every quarter, therefore, the central bank has fewer chances of accelerating interest rates. So the rate hike should be a full percent rate hike.