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- US 10-year yield fell to 4.93% as lower crude prices helped ease persistent inflation fears.
- Crude prices dropped following Saudi pipeline restoration efforts and upcoming US-Gulf leader meetings.
- Fed Chair Warsh warned inflation remains high, boosting October rate hike expectations to 53.1%.
USD/CHF extends its losses for the second successive day, trading around 0.8230 during Asian hours on Friday. The pair depreciates as the US Dollar (USD) faced challenges from falling oil prices, which helped ease broader inflation concerns.
Easing inflation concerns pulled US Treasury yields back from their recent multi-year highs, with the benchmark 10-year yield falling to around 4.93% after briefly breaching the 5.0% mark earlier in the week.
Crude prices declined following news that Saudi Arabia was actively working to restore flows through its East-West pipeline, while market attention also turned toward upcoming meetings between US President Donald Trump and Gulf leaders.
However, downside pressure on the Greenback could be restrained following hawkish remarks from Fed Chair Kevin Warsh. Warsh stated that inflation has remained too high for too long and emphasized that recent summer economic data failed to show meaningful structural improvement. In the wake of his comments, market expectations adjusted rapidly; the CME FedWatch tool indicated that traders are now pricing in a 53.1% probability of another rate hike at the Federal Reserve’s October meeting, up from 44% the previous day.
USD/CHF rally pauses as UOB flags consolidation below key resistance
Strategists at UOB Group note that the latest leg higher in USD/CHF has unfolded broadly in line with their earlier guidance. In their “most recent narrative from Tuesday (15 Sep, spot at 0.8175),” they had highlighted that USD “must break and hold above 0.8205 before a move to 0.8245 can be expected.” The pair subsequently “broke above both levels as it surged to 0.8265,” confirming the strength of the near-term upswing.
UOB cautions, however, that “while momentum remains strong, it is too early to tell whether it is sufficient for USD to break above 0.8300.” On the downside, they point out that “a breach of 0.8185 (‘strong support’ level was at 0.8145 yesterday) would mean that the upside momentum from late last week … is easing,” suggesting that any failure to hold above that support would signal a loss of bullish impetus in the 1–3 week horizon.
