USD/CHF strengthens as hawkish Fed tone outweighs Swiss data

• USD/CHF rebounds toward 0.7750 as the US Dollar firms after hawkish Fed Minutes.
• Swiss Industrial Production contracts despite a stronger trade surplus.
• Markets eye US Jobless Claims, with PCE inflation and Q4 GDP due on Friday.

The Swiss Franc (CHF) edges lower against the US Dollar (USD) on Thursday, pressured by renewed strength in the Greenback. At the time of writing, USD/CHF is trading around 0.7750, rebounding after touching an intraday low near 0.7694.

Switzerland’s latest economic data did little to lift the Franc. Exports increased to CHF 22,229 million in January from CHF 19,866 million previously, while imports declined to CHF 18,411 million from CHF 18,932 million. This pushed the trade surplus higher to CHF 3,818 million from CHF 934 million.

However, Industrial Production fell 0.7% YoY in the fourth quarter, compared to a 2% expansion previously.

The Greenback gains traction after the Federal Reserve’s (Fed) Meeting Minutes released on Wednesday reinforced a cautious policy stance, suggesting officials are in no hurry to ease amid slow progress on disinflation.

Several participants suggested it would likely be appropriate to keep the interest rate steady for some time while assessing incoming data. officials left the door open to future rate hikes if inflation remains above target.

At the same time, some members acknowledged that rate cuts could become appropriate later this year if price pressure continues to ease in line with projections. The Minutes also noted that “the vast majority of participants judged that labor market conditions had been showing some signs of stabilization."

Recent US economic data further supports the case for the Fed to remain on hold, although markets are still pricing in around two rate cuts in the second half of the year.

Sustained expectations of lower interest rates later this year could act as a headwind for the US Dollar and limit its upside potential. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading around 97.82, its highest level since February 6.

Looking ahead, Thursday’s US economic docket remains relatively light, with weekly Initial Jobless Claims and the Philadelphia Fed Manufacturing Survey on tap.

However, investor focus is likely to shift toward Friday’s key releases, including the Core Personal Consumption Expenditures (PCE) Price Index and the advance reading of fourth-quarter US Gross Domestic Product (GDP).