Swiss franc higher as markets eye US jobs report

• SNB’s Jordan warns about inflation
• Fed split on next move
• US debt ceiling deal sails through House of Representatives

The Swiss franc has moved higher on Thursday and is trading at 0.9068 in the North American session, down 0.41%. On Wednesday, the Swiss franc fell as low as 0.9147, its lowest level in two months.

SNB’s Jordan warns against core inflation remaining above 2%

The Swiss National Bank meets on June 22^nd and SNB President Jordan had a warning today for the markets. Jordan said that the central bank would not allow inflation to become entrenched, adding that if core inflation remained above 2% for too long, it would be difficult to bring it back down below 2%.

Inflation remains above the Bank’s 0-2% target, and Jordan has repeatedly warned that the Bank could continue tightening rates to curb inflation. The Bank is expected to raise rates by 25 basis points at the June meeting, which would bring the cash rate to 1.75%.

To pause or not to pause?

The Federal Reserve meets on June 14^th and members appear divided as to what action the Fed will take. Fed member Mester supports another rate hike and said on Wednesday that she did not see a “compelling reason to pause”, saying there was a more compelling case to ‘hike and hold’ rates. On the opposite side, members Jefferson and Harker said on Wednesday that they supported a pause in June and making future rate decisions based on the data. Jefferson warned that the effects of tightening had not been fully processed by the economy and higher rates could increase stress on the banking sector.

The markets had widely expected a rate pause just a few weeks ago, but have now priced in a 25-basis point hike at 67%. US economic data has been solid, making it more difficult for the Fed to take a pause. Unless Friday’s nonfarm payrolls are woefully below the forecast, it’s looking likely that the Fed will be forced to hike again in June.

The US House of Representatives has approved the debt ceiling deal by a resounding vote of 314-117. The Senate will have to quickly vote on the bill, as the government could reach its spending limit as early as June 5. The debt ceiling crisis sapped risk appetite and has helped the US dollar post broad gains against the majors. Fed member Loretta said that the deal removes a “big piece of uncertainty” about the economy.

The US dollar has posted strong gains against the majors due to the debt crisis ceiling, which sapped risk sentiment. Once the debt ceiling is out of the way, it will be interesting to see if the US dollar loses some steam.

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USD/CHF Technical

• USD/CHF is testing support at 0.9103. Below, there is support at 0.9022
• 0.9156 and 0.9237 are the next resistance lines

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