USD/CHF scales above 0.9170 as USD Index extends recovery

• USD/CHF has climbed above 0.9170 as USD Index has paired the majority of losses faced after the Fed’s dovish guidance.
• Bearish bets on USD Index based on Fed’s dovish guidance have little significance as major central banks are reaching saturation.
• SNB went for a bigger rate hike despite the financial instability inspired by the demise of Credit Suisse.

The USD/CHF pair has climbed above the 0.9170 resistance in the Asian session. The Swiss franc asset has been backed by a solid recovery in the US Dollar Index (DXY). The USD Index has paired the majority of losses despite the Federal Reserve (Fed) being close to concluding its policy-tightening spell and only one rate hike is left in the basket.

Bearish bets built on the USD Index were mainly the outcome of dovish interest rate guidance by Fed chair Jerome Powell while delivering the monetary policy statement on Thursday. Investors ignored a big no to consideration of rate cuts in 2023 but cheered the change of language from ‘ongoing increases are appropriate’ to ‘some additional hikes might be appropriate’.

Along with the Fed, other central banks are also reaching to their terminal rate as the Reserve Bank of Australia (RBA) has considered a pause to the rate-hiking spree from its April meeting. Also, the Bank of England (BoE) cited on Thursday that more tightening will be required if there will be evidence of persistent inflation. The BoE came with this commentary after pushing its rates by 25 basis points (bps) to 4.25%.

Adding to that, the Bank of Canada (BoC) has already paused its rate-hiking cycle. As a majority of central banks are reaching a point of saturation then significant bearish bets on USD Index based on Fed’s dovish guidance have little significance.

On the Swiss Franc front, the Swiss National Bank (SNB) pushed rates by 50 basis points (bps) to 1.50%. SNB Chairman Thomas J. Jordan went for a bigger rate hike despite the financial instability inspired by the demise of Credit Suisse. The move was to weigh heaving on Swiss inflation, which has gone beyond the control of the SNB.