USD/CHF corrects and approaches 0.8950 as SNB comes to the fore

• USD/CHF has failed to prolong its rally as the focus has been on SNB policy.
• A sideways move is expected for the DXY as opinion is divided on the Fed’s interest rate guidance.
• The SNB is expected to raise interest rates by 25 basis points to 1.75%.

USD/CHF has shown a slight correction to near 0.8950 in the European session. The Swiss Franc has struggled around 0.8970 as investors are shifting their attention towards the Swiss National Bank (SNB) interest rate decision, due to be announced on Thursday.

S&P 500 futures have turned bearish again as investors are taking precautions due to the extended weekend in the United States. Market participants will return on Tuesday as the markets are closed on Monday for Juneteenth.

The USD Index (DXY) has been unable to extend the recovery move made above 102.45. A sideways move is expected for the DXY as opinion is divided on the Federal Reserve’s (Fed) interest rate guidance. Although Fed Chairman Jerome Powell announced that two interest rate hikes are appropriate this year, investors are hoping for only one rate hike as the US economic outlook is losing resilience.

Meanwhile, headlines from talks between US Secretary of State Antony Blinken and Chinese President XI Jinping are not having a significant impact on the currency front. Blinken cited concerns about Chinese companies supplying Russian military technology. US President Joe Biden has made it clear that the economy does not want a cold war with China.

As for the Swiss Franc, investors are turning their attention to the Swiss National Bank (SNB) interest rate decision. SNB Chairman Thomas J. Jordan is expected to raise interest rates by 25 basis points (bp) as he believes a high inflation environment will have more side effects than a low inflation environment.