USD/CHF retreats towards 0.9100 amid dicey markets, focus on yields, US Retail Sales

• USD/CHF struggles to extend recovery from six-week low, eases from intraday high of late.
• Market sentiment dwindles amid mixed concerns over SVB fallout, Fed.
• Treasury bond yields defend the previous day’s rebound, US stock futures print mild losses.

USD/CHF reverses from the intraday high to 0.9140 as it fades the previous day’s recovery from a six-week low during early Wednesday. Even so, the Swiss Franc (CHF) pair remains indecisive on a day while tracing the sluggish markets amid mixed clues.

Recently increasing calls of the Fed’s 0.25% rate hike, versus fears of no move due to the challenges for the US banks emanating from the fallouts of the Silicon Valley Bank (SVB) and Signature Bank, seem to underpin the US Dollar’s run-up even as the inflation data eased. Also supporting the greenback could be the latest recovery in the US Treasury bond yields.

That said, US Dollar Index (DXY) picks up bids bid to refresh the intraday high near 103.75 during the two-day rebound from a one-month low. It should be noted that the US 10-year Treasury bond yields grind near 3.68% by the press time, after posting the biggest daily gain in five weeks the previous day, while the two-year bond coupons extend the previous day’s recovery from the six-month low to 4.31% at the latest.

On Tuesday, the US Consumer Price Index (CPI) and CPI ex Food and Energy both matched 6.0% and 5.5% YoY market forecasts, versus 6.4% and 5.6% respective previous readings. It should be noted that the market consensus of 0.4% MoM for the CPI, versus 0.5% prior, also proved right but the CPI ex Food & Energy rose to 0.5% compared to 0.4% analysts’ estimates and prior. “The Federal Reserve is seen raising its benchmark rate a quarter of a percentage point next week and again in May, as a government report showed U.S. inflation remained high in February, and concerns of a long-lasting banking crisis eased,” said Reuters following the US inflation data release.

Elsewhere, Swiss Producer and Import Prices eased in February to -0.2% MoM versus -0.1% expected and 0.7% prior.

While talking about the SVB risk, US Senate Banking Committee Chairman Sherrod Brown and Federal Reserve Governor Michelle Bowman ruled out chatters suggesting the grim conditions of the US banking industry. On the contrary, Wall Street Journal (WSJ) reported that a raft of tougher capital and liquidity requirements are under review, as well as steps to beef up annual “stress tests” that assess banks’ ability to weather a hypothetical recession, according to a person familiar with the latest thinking among U.S. regulators. “The rules could target firms with between $100 billion to $250 billion in assets, which at present escape some of the toughest requirements,” per WSJ.

Hence, the market’s indecision challenges the USD/CHF buyers even as the US Dollar manages to defend the previous day’s gains ahead of the key US data. That said, today’s US Retail Sales for February, expected -0.3% MoM versus 3.0% prior, will be important to watch as the hawkish bets on the Federal Reserve’s (Fed) 25 basis points (bps) rate hike in the next week’s Federal Open Market Committee (FOMC) improve lately.

Technical analysis

USD/CHF is likely to refresh 2023 low, currently near 0.9060 unless rising back beyond the support-turned-resistance line from early February, around 0.9345 by the press time.