USD/CHF tries to continue gains over 0.9180 as the Fed forecasts inflation of 2% in 2025

In the early Tokyo session, the USD/CHF pair is bouncing in a narrow range below the important barrier of 0.9180. The Swiss Franc asset demonstrated a V-shaped recovery on Wednesday after registering a fresh 14-month low at 0.9085 as the United States Producer Price Index (PPI) and retail sales December data stayed lower than anticipated. Hawkish remarks from Federal Reserve (Fed) policymakers were crucial for reinforcing the US Dollar's strength and driving USD/CHF to near 0.9180.

According to the US PPI report, falling prices of goods and services at factory gates caused the possibility of an overvaluation of shares due to reduced expectations of net profit margins. This compelled investors to sell US stocks, which weighed heavily on the S&P 500 and supported the theme of risk aversion. As the lower Producer Price Index is a prerequisite for lower Consumer Price Index (CPI) estimates, it also pushed the return on US Treasury bonds into the negative region. Yields on 10-year US Treasuries plummeted to 3.37 percent.

The US Dollar Index was saved by hawkish remarks from Fed policymakers (DXY). Patrick Harker, president of the Philadelphia Fed, was quoted by Reuters as saying that although Fed policymakers favor decreasing the rate of interest rate hikes, they expect terminal rate projections to remain in a range of 5.25-5.50% and inflation to reach 2% in CY2025.

Meanwhile, investors in Swiss francs are expecting the release of the Producer and Import Prices (Dec) data on Thursday. According to the consensus, annual statistics will decrease to 3.1% from 3.8% previously. While the monthly figures will increase by 0.1%, a 0.5% decrease was previously reported.