USD/CHF DROPS BELOW 0.9030 AS FED EXPECTS DECENT SOFTENING OF US INFLATION IN 2023

The USD/CHF pair has extended its downside below 0.9030 in the Asian session. The downside in the Swiss Franc asset has stretched as Federal Reserve (Fed) policymakers are anticipating a decent softening of the United States Consumer Price Index (CPI) this year.

This has weighed heavily on the US Dollar Index (DXY) as it is declining towards the crucial support of 102.00. The quick softening of US inflation has strengthened the odds of rate cuts by the Fed this year. The commentary from Minneapolis Fed Bank President Neel Kashkari that inflation will be at the middle 3% by end of this year, closer to 2% next year has weakened the appeal for the USD Index.

For current guidance, US inflation (March) data will be keenly watched. Analysts at NBF expect “The energy component may have had a negative impact on the headline index as prices likely fell in both the gasoline and natural gas segment. Expected gains for shelter and used vehicles could still result in a 0.2% monthly increase in headline prices. The core index, for its part, could have increased 0.4% MoM, which would translate into a one-tenth increase in the annual rate to 5.6%.”

Meanwhile, S&P500 futures are showing lackluster moves as investors are anxious ahead of the quarterly result season, portraying mildly positive market sentiment. The street is anticipating a contraction in overall profits to be reported by S&P500 amid higher interest rates and tight credit conditions by US commercial banks.

On the Swiss Franc front, Switzerland's parliament failed to approve the 109 billion Swiss francs ($120.5 billion) of financial guarantees used to rescue Credit Suisse last month, in a first-round vote that was largely symbolic given the state had committed the funds, as reported by Reuters. As Switzerland's upper house had already approved the rescue, the two chambers of the legislative body will vote again on Wednesday.