USD/CHF remains below 0.9100 amid risk-off, bulls have the upper hand near YTD top

• USD/CHF stands tall near its highest level since November 11 touched on Tuesday.
• A softer risk tone underpins the safe-haven CHF and caps gains amid a weaker USD.
• Reduced Fed rate cut bets should limit the USD downfall and favour USD/CHF bulls.

The USD/CHF pair enters a bullish consolidation phase during the Asian session on Wednesday and oscillates in a narrow band near its highest level since November 11 touched the previous day. Spot prices currently trade around the 0.9080 region and seem poised to prolong the recent positive momentum witnessed over the past month or so.

The Swiss Franc (CHF) continues to be undermined by the Swiss National Bank's (SNB) unexpected move to cut interest rates in March amid a faster-than-anticipated slowdown in inflation and economic growth. In contrast, the markets have been scaling back their expectations for rate cuts by the Federal Reserve (Fed) amid signs of a still-resilient US economy. This, in turn, favours the US Dollar (USD) bulls and validates the positive outlook for the USD/CHF pair.

Data released this week showed that the US manufacturing sector expanded in March for the first time since September 2022 and that demand for labor remains elevated. Adding to this, comments by a slew of influential FOMC members raised doubts over whether the Fed will cut interest rates three times this year. In fact, the current market pricing points to a total of 65 basis points (bps) rate cut for 2024, lower than the 75 bps projected by the US central bank in March.

The shift in outlook, meanwhile, remains supportive of elevated US Treasury bond yields and should help limit the ongoing USD corrective decline from its highest level since February 14. That said, the risk-off impulse, which tends to underpin demand for traditional safe-haven assets, could lend some support to the CHF and act as a headwind for the USD/CHF pair. Traders now look to the US macro data and speeches by influential FOMC members for a fresh impetus.