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USD/CHF aims to surpass 0.9150 as US Dollar remains upbeat, US Retail Sales in focus

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  • USD/CHF gathers strength to break above 0.9150 as geopolitical tensions improve safe-haven demand.
  • US bond yields soar as the Fed is expected to maintain a restrictive monetary policy for a longer period.
  • Easing Swiss producer inflation boosts expectations of more rate cuts by the SNB.

The USD/CHF pair hovers near six-month high around 0.9150 in Monday’s European session. The Swiss Franc asset is expected to extend upside as the US Dollar strengthens due to potential risks of further escalation in Middle East tensions and receded hopes of Federal Reserve (Fed) lowering interest rates from the June meeting.

S&P 500 futures have posted significant gains in the European session, portraying some improvement in investors’ risk appetite. Though risky assets could retreat amid fears that Israel could retaliate to airstrike by Iran in which hundreds of drones and missiles were launched.

10-year US Treasury yields soar to 4.55% as the Federal Reserve (Fed) has no urgency to reduce interest rates with inflation remaining persistently higher. The speculation for the Fed reducing interest rates in the June and July meetings has faded and investors are now anticipating rate cuts in the September meeting.

The US Dollar Index (DXY) turns sideways after refreshing five-month high near 106.00. In today’s session, investors will focus on the monthly Retail Sales data for March, which will be published at 12:30 GMT. The Retail Sales data is estimated to have grown at a slower pace of 0.3% against the prior reading of 0.6%. A slowdown in Retail Sales would release some heat from the stubborn inflation outlook.

Meanwhile, the Swiss Franc remains on the backfoot as the Swiss National Bank (SNB) is expected to cut interest rates again in the June meeting, keeping in mind that inflation has come down sustainably below 2%.

The confidence in price pressures slowing further has deepened after the Swiss Producer and Import Prices grew moderately in March. Monthly producer inflation grew steadily by 0.1%. Annually, Producer and Import prices contracted at a higher pace of 2.1% from the former reading of 2.0%.

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