USD/CHF struggles to retrace its recent losses, hovers around 0.8620

Source Fxstreet
  • USD/CHF could face downward pressure due to the downward US Treasury yields.
  • An improved US balance sheet weighs on the US yields, undermining the US Dollar.
  • Swiss Real Retail Sales and the ZEW Survey may provide cues on Swiss economic health on Wednesday.

USD/CHF attempts to retrace its recent losses, inching higher around 0.8620 during the Asian session on Tuesday. However, the US Dollar (USD) has faced a challenge against the Swiss Franc (CHF) due to the decline in US Treasury yields. The release of an improved US balance sheet has supported prices for US Treasury bonds, which, in turn, puts downward pressure on US yields.

Since October 2023, the decline in US yields has played a role in bolstering the sustainability of the US Treasury. Additionally, enhanced economic growth has resulted in improved tax receipts. The US Treasury Department has recently disclosed its intention to borrow $760 billion in the first quarter, marking a decrease from the initial estimate of $816 billion in October.

The US Dollar Index (DXY) snaps its two-day losing streak, which could be attributed to the risk aversion sentiment on the concern over the escalated tension in the Middle East. US President Joe Biden’s administration is anticipated to authorize military strikes in response to the recent drone attack on a US outpost in Jordan, resulting in the death of three US troops and injuries to at least 24.

Market observers will closely monitor Tuesday's releases of the Housing Price Index and Consumer Confidence figures, seeking additional insights into the market landscape following the scheduled Federal Open Market Committee (FOMC) statement on Wednesday, January 31.

Acknowledging the robust Swiss Franc's impact on inflation containment and challenges faced by domestic companies, SNB President Thomas Jordan expressed uncertainty about the Swiss National Bank's (SNB) stance on the persistent strength of the currency. Attention will be directed towards Wednesday's Real Retail Sales and the ZEW Survey to gauge the overall health of the Swiss economy.

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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