USD/CHF advances near 0.8900 amid market caution over the Fed's decision

• USD/CHF gains ground on expectations that the Fed will extend its high rate policy for longer.
• Bond markets are facing selling pressure as a result of the resilience seen in the US economy.
• The Swiss trade balance revealed a surplus of 3,662 million, exceeding expectations of 3,500 million.

He USD/CHF rises towards 0.8900 at the start of the European session on Tuesday, driven by the rise in US Treasury yields. The Market expectations indicate that the Federal Reserve will keep its monetary policy unchanged during the March meeting, scheduled for Wednesday. The Fed is under pressure to prolong its high interest rates in response to recent inflationary pressures.

Bond markets are experiencing selling pressures as emerging new signs of resilience in the US economy (US), leading investors to adjust their expectations for fewer interest rate cuts this year. The probability of rate cuts in June and July has decreased, standing at 55.1% and 73.7%, respectively.

In February, the Swiss trade balance revealed a surplus of 3,662 million, exceeding expectations of 3,500 million, but falling from 4,701 million in January. Imports (mom) increased to 18,812 million from the previous 18,046 million, while exports decreased to 22,474 million from the previous 22,746 million.

The Swiss National Bank (SNB) forecasts average inflation of 1.9% in 2024. Currently, the inflation rate is notably below this projection, at 1.2%. However, in February there was a notable increase in the Consumer Price Index (CPI), which rose 0.6% compared to the previous monthly 0.2%.

Market participants are eagerly awaiting the Swiss National Bank's (SNB) March monetary policy meeting, scheduled for Thursday. According to Reuters, there is a 29% chance that the SNB will cut its official interest rate from 1.75% at the meeting. A rate cut by the SNB could weaken the Swiss franc (CHF), as lower interest rates tend to attract fewer foreign capital inflows.