USD/CHF oscillates above 0.9900 amid a firmer DXY, focus shifts to Fed policy
- USD/CHF is juggling above 0.9900 as robust GDP numbers have strengthened the DXY.
- A decline in consumer spending has sent yields on a bumpy ride.
- Discussions on price mechanism between EU, the UK, and Switzerland have hogged the limelight.
The USD/CHF has shifted into a rangebound structure above the critical hurdle of 0.9900 in the early Asian session as investors are shifting their focus toward the monetary policy decision by the Federal Reserve (Fed). The asset resurfaced firmly from around 0.9840 as the US dollar index (DXY) recovered sharply after investors shifted back to the risk-aversion theme.
S&P500 snapped two-day gains after a meltdown in Meta Platforms Inc. (META) on Thursday. The tech-giant nose-dived to a five-year low amid a dismal earnings report. This triggered the danger of keeping money in the risk-perceived assets.
The DXY enjoyed sheer liquidity after an upbeat Gross Domestic Product (GDP) report. The US GDP escalated to 2.6% for the third quarter against the projections of 2.4%. A positive growth rate number snapped the contraction of two straight quarters of CY2022 from January to June.
The instrument that has been impacted after the release of the GDP report is US Treasury yields. The 10-year US Treasury yields dropped to 3.93% after the Commerce Department showed a decline in consumer spending that accounts for 70% of US economic activity. Consumer spending has expanded by 1.4%, remaining lower than the 2% growth recorded in the second quarter. A slowdown in consumer spending indicates that mounting inflationary pressures are exhausting after all.
A decline in consumer spending rate has trimmed the odds of a bigger rate hike by the Federal Reserve (Fed), if not, the projection could be less-hawkish next week.
On the Swiss franc front, discussions on the collaboration of the European Union, the UK, and Switzerland to combat soaring energy bills are in focus. The EU is planning to bring a price cap mechanism on energy prices, which may support households against soaring energy bills. The strategy is to be executed without boosting demand or delivery of electricity to foreign consumers at subsidized prices.
In response to that, the Trading bloc’s executive arm is advising EU members that such a price limit would have to be extended to power-importing countries like the UK or Switzerland for it to be effective, reported Bloomberg.