Franc Held Despite Solid Swiss Data
USD/CHF strengthened on Tuesday (May 19th) and traded around 0.7870, up around 0.35%. The strengthening occurred as the US dollar was again supported by expectations of a more hawkish monetary policy in the United States.
The market considered rising US bond yields to be the main driver. The 10-year US Treasury yield rose to around 4.613%, nearing its highest level since February 2025, reflecting investor concerns that high energy prices could again suppress inflation.
Correspondingly, market participants are increasingly confident that the Fed will remain tight for longer. The market said interest rate cuts for the remainder of this year have been "thinly priced in," while the chance of a 25 bps rate hike at the December meeting is estimated at around 38% based on CME FedWatch.
Reuters also quoted comments by Lou Brien (DRW Trading), who assessed that market movements reflect uncertainty about how new Fed Chairman Kevin Warsh will address persistent inflation. The market is said to be seeking assurance that the central bank will maintain its independence in policy decision-making.
On the geopolitical front, US President Donald Trump's decision to postpone a strike on Iran temporarily improved sentiment, but caution remains high as diplomatic talks remain uncertain and major differences over Iran's nuclear program and the Strait of Hormuz remain unresolved. This tends to maintain defensive demand for the dollar.
In Switzerland, preliminary data showed the economy grew 0.5% quarter-on-quarter in the first quarter after 0.2% in the previous quarter, its strongest quarterly performance in a year. However, the franc struggled to benefit from the data as the market remained primarily focused on the dollar, supported by high yields and expectations of tighter US interest rates. (arl)
Source: Newsmaker.id
