The greenback, which remained range-bound against the Swiss franc on Friday, fell on the first trading day of the week after the Swiss statistical organization reported a rebound in inflation in January. There was no other major economic news yesterday. Last week, the US dollar was driven by anticipation of higher rate hikes by the US Fed in the upcoming policy meeting.
Also, the US dollar received support from an improvement in consumer sentiment and forecasts of higher inflation in the near term. Overall, the USD/CHF pair fell from a high of 0.9260 to a low of 0.9219 in the past 24 hours.
On Friday, the University of Michigan (UoM) published a report indicating a slight improvement in US consumer sentiment in February. The report indicated that the consumer sentiment index inched up to 66.40 in February from 64.90 in January. Economists had anticipated the index to rise to 65.
The consumer sentiment index rose for the third successive month, hitting its highest level since reaching 67.20 in January. The continued increase in the headline index has come against the backdrop of a rise in the current economic conditions index to 72.60 in February from 68.40 in January.
During the same period, the consumer expectations index inched lower to 62.30 in February from 62.70 in January. The consumer sentiment index rose for the third successive month, hitting its highest reading since recording 67.20 in January last year.
Furthermore, the UoM’s report also stated that one-year inflation forecasts rose to 4.20% in February from 3.90% in January, with forecasts rebounding after declining for three months in a row.
Also, five-year expectations stood at 2.90% for the third successive month and stood in the narrow range of between 2.90% and 3.10% for 18 out of the past 19 months.
Furthermore, one-year inflation forecasts inched up to 4.20% in February from 3.90% in January, with projections rising after dipping for three successive months. Notably, Thomas Barkin, Richmond Fed President, stated that it is crucial for the US central bank to hike benchmark interest rates to guarantee that it cools inflation to the targeted 2% level.
In the European session, the Swiss Federal Statistical Office stated that the consumer price index grew by 0.60% m-o-m in January to 105 points after declining by 0.20% in the previous month. Economists had anticipated a 0.50% rise.
On a y-o-y basis, inflation rose by 3.30% in January 2023.
The rebound in consumer price inflation is expected to keep the USD/CHF pair range-bound in the short term.
The historical price chart indicates that the USD/CHF pair is declining after facing resistance at 0.9260. The next major support is anticipated only near 0.9160. Additionally, the currency pair is trading below its 50-day moving average while the stochastic indicator is in the bearish zone. Therefore, we anticipate the USD/CHF pair to remain in a downtrend in the days ahead.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
