USD/CHF Flunks Out Due to Falling Bond Yields

On Wednesday, the USD/CHF fell by about 100 pips after cutting some losses during the previous hour, although it has rebounded halfway at the time of writing. The pair hit its lowest point since November 2021 at 0.9084 before recovering and moving back above 0.9166.

The US dollar was weaker, while the Swiss franc was stronger due to falling European and US government bond yields. The US 10-year yield plummeted to 3.38%, the lowest level since September, and the Swiss 10-year bond yield decreased to 1.05%, the lowest level since early December.

USD/CHF Decline Fueled By US Economic Data

After data revealed a slowdown in inflation and some “not so bad” activity numbers, demand for European bonds increased. This was especially true after a media report on Tuesday that stated policymakers at the European Central Bank (ECB) were beginning to consider a slower pace of interest rate increases after the February meeting.

The euro fell as a result of expectations for a less hawkish ECB, and it is still a hindrance. The EUR/CHF exchange rate has dropped significantly, reversing from six-month highs near 1.0100 to values under 0.9900.

The publication of economic data on Wednesday made USD/CHF even more volatile. While Retail Sales and Industrial Production decreased more than expected, inflation data came in below estimates.

Dollar Weak Across Board

In other news, the USD/CAD is heading in the direction of 1.3400 as the US Dollar pares back some of its recent losses that came as a result of the publication of US economic data. Despite the dollar’s decline, which was supported by Canadian data, the pair maintained its daily highs.

On Wednesday, Canada’s inflation data fell short of forecasts. The Industrial Product Price Index (IPPI) fell 1.1% from one month to the next, less than the market consensus decrease of 0.3%. It increased by 7.6% from the same time last year. In December, the Raw Materials Price Index (RMPI) declined 3.1% vs. forecasts for a 1.3% decline.