USD/CHF approaches 0.9430 as risk-off profile solidifies ahead of US ISM PMI

• USD/CHF is marching towards 0.9430 as investors’ risk appetite has trimmed dramatically.
•  The street is expecting that US recession fears cannot be ignored as the Fed has decided to announce more rates.
• Switzerland’s government admitted that it expects an economic slowdown but no recession this year.

The USD/CHF pair is facing fragile hurdles after a sheer run-up of around 0.9420 in the early Tokyo session. The Swiss Franc asset is expected to continue its vertical run as investors are gung-ho for safe-haven assets to dodge sheer volatility.

Federal Reserve (Fed) policymakers have kept on reiterating that the current monetary policy is not sufficiently restrictive enough to bring down the persistent inflation in the near period. Therefore, investors should brace for more rate hikes to cool down the Consumer Price Index (CPI) significantly.

Gains generated by S&P500 on Monday were surrendered in Tuesday’s session as the street is anticipating that recession fears cannot be ignored as the Fed has decided to announce more rates through summer to trim the stubbornness in the United States inflation. The US Dollar Index (DXY) has displayed a responsive buying action and has crossed the critical resistance of 104.60 amid a decline in investors’ risk appetite. Meanwhile, the alpha delivered on the 10-year US Treasury yields has scaled marginally higher to near 3.93%.

Contrary to the hawkish stance supported by the street, Vassili Serebriakov, FX strategist, at UBS said “The disinflation story continues. It took a bit of a pause in January, but it's not a reversal. We think some of the dollar strength is exaggerated. So we are cautiously fading dollar strength.”

On Wednesday, USD/CHF will remain in action amid the release of the US ISM Manufacturing PMI data. The economic data has been reporting a figure below 50.0 for the past three months and a similar performance is expected today, however, the scale of contraction will be lower. The economic data is seen at 48.0 from the former release of 47.4, posing a gloomy outlook for the US economy ahead.

Meanwhile, the Swiss Franc witnessed pressure after a flat Gross Domestic Product (GDP) (Q4) release on Tuesday. The street was expecting a growth of 0.3%. Switzerland’s government said in a statement on Tuesday that it expects an economic slowdown but no recession this year.