USD/CHF FINDS CUSHION AROUND 0.9100 AS FOCUS SHIFTS TO US INFLATION

The USD/CHF pair has sensed an intermediate cushion near the round-level support of 0.9100 in the early Asian session. The Swiss franc asset is gathering strength to extend its recovery above the immediate resistance of 0.9127. However, the upside looks capped as the collapse of Silicon Valley Bank (SVB) has limited the expectations of a bumper pace in the policy-tightening regime by the Federal Reserve (Fed), as expected earlier, to tame the stubborn inflation.

The Fed on Sunday announced it would make additional funding available through a new Bank Term Funding Program, which would offer loans of up to one year to depository institutions, backed by Treasuries and other assets these institutions hold, as reported by Reuters.

In times, when firms and households are losing confidence in the United States banking system, the street considers that a halt or a continuation of the slowdown in the policy-tightening pace by Fed chair Jerome Powell would be prudent to restore confidence.

After the catastrophic collapse of SVB, investors are shifting their focus on the US Consumer Price index (CPI) data, which will provide direction to the FX domain ahead.

Analysts at CIBC are of the view that “A further increase in prices at the pump and continued pressure in core categories suggest that prices rose by an uncomfortably fast 0.4% in February. Looking at core (ex. food and energy) categories, shelter prices are set to peak imminently as the typical lags with new leases that are resetting at lower rates kick in, but continued pressure in core services outside of the shelter, in line with the tight labor market, will keep the Fed on a tightening path.

The US Dollar Index (DXY) has shown some tough fight after dropping to near 103.50 as bulls are reluctant to go downside further ahead of the US inflation release.

S&P500 futures have shown some decent gains after a choppy session that ended with marginal losses. This shows a recovery in the risk appetite theme but a broad-based caution cannot be ruled out. The return offered on 10-year US Treasury yields has dropped sharply to 3.54%.

On the Swiss Franc front, the monthly Producer Price Index (PPI) (Feb) is expected to show a deceleration of 0.1%, which indicates a decline in the households’ demand that has forced producers to trim prices of goods and services offered at factory gates. A decline in the monthly PPI figure will be music to the ears of the Swiss National Bank (SNB) as Swiss inflationary pressures have gone beyond its control.