USD/CHF extended its recent rally from the previous session, trading near 0.8220 during Wednesday’s European session. The Swiss franc is struggling to maintain strength as improving risk sentiment reduces demand for safe-haven assets, aided by easing tensions between the U.S. and China over tariffs.
Trade Talks Show Progress, But Approval Pending
U.S. Commerce Secretary Howard Lutnick indicated progress, revealing that the U.S. and China have agreed on a framework for implementing the Geneva Consensus on trade matters. Chinese Vice Commerce Minister Li Chenggang described discussions as rational and candid, with plans to report the agreement to top Chinese leaders. However, both sides must seek final approval before moving forward.
Stable U.S. Treasury Yields Ahead of Inflation Data
U.S. Treasury yields remained steady amid cautious positioning ahead of key U.S. inflation data. The upcoming Consumer Price Index (CPI) report is anticipated to shed light on tariff impacts and broader inflation dynamics. Currently, the 2-year and 10-year U.S. Treasury yields stand at 4.01% and 4.46%, respectively.
Swiss Inflation Data Suggests Potential Rate Cut
Switzerland’s May CPI data revealed a 0.1% year-on-year decline, marking the first deflation reading since March 2021 and falling below the Swiss National Bank’s 0-2% target range. This soft inflation data increases expectations that the SNB may reduce interest rates by 25 basis points at its upcoming June 19 meeting, which could weigh on the franc further.
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