USD/CHF wavers above 0.7900 amid a shaky ceasefire in Iran

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The US Dollar (USD) nudges higher against the Swiss Franc (CHF) on Thursday and consolidates above 0.7900 after bouncing from a low of 0.7870.

USD/CHF ticks up from 0.7870 lows and consolidates above 0.7900.
Risk appetite has vanished amid the uncertainty about Iran's peace process.
On the macroeconomic front, US inflation figures will grab the focus on Thursday and Friday.

The US Dollar (USD) nudges higher against the Swiss Franc (CHF) on Thursday and consolidates above 0.7900 after bouncing from a low of 0.7870. Investors’ concerns about the fragility of the ceasefire in Iran are keeping risk appetite subdued and have provided moderate support to the safe-haven US Dollar.

A few hours after the announcement of the ceasefire, Iran closed the Strait of Hormuz as, in their opinion, Israel had violated some of the clauses of the peace proposal with a massive attack on Lebanon that killed more than 180 people.

Israel and the US affirmed that the operations against Hezbollah in Lebanon are not contemplated in the agreement, and US President Trump warned of further action if Tehran fails to comply with the deal.

The peace process remains alive

Washington and Tehran, however, seem to be moving forward with the peace process. Both countries have announced that they will send their respective delegations to peace talks in Pakistan on Saturday. Markets, however, have come to terms with the fragility of the ceasefire and are showing a moderate risk-off mood, wary that the hostilities might resume at any moment.

On Wednesday, in the US, the minutes of the last Federal Reserve (Fed) meeting showed a balanced stance, with rate cuts still on the table, but some voices raised the possibility of monetary tightening if inflation remains above the 2% target for a prolonged period.

Later on Thursday, the US Personal Consumption Expenditures (PCE) Prices Index will provide some hints about price pressures, although the main focus will be on Friday’s Consumer Price Index (CPI). The CPI will show figures from March, considered more relevant, as they reflect the impact of the war.

In Switzerland, the calendar has been thin this week. The only event worth mentioning is the March unemployment rate, which remained steady at 3%.

Economic Indicator

Personal Consumption Expenditures - Price Index (YoY)

The Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The YoY reading compares prices in the reference month to a year earlier. Price changes may cause consumers to switch from buying one good to another and the PCE Deflator can account for such substitutions. This makes it the preferred measure of inflation for the Federal Reserve. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Economic Indicator

Core Personal Consumption Expenditures - Price Index (YoY)

The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures." Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Why it matters to traders?

After publishing the GDP report, the US Bureau of Economic Analysis releases the Personal Consumption Expenditures (PCE) Price Index data alongside the monthly changes in Personal Spending and Personal Income. FOMC policymakers use the annual Core PCE Price Index, which excludes volatile food and energy prices, as their primary gauge of inflation. A stronger-than-expected reading could help the USD outperform its rivals as it would hint at a possible hawkish shift in the Fed’s forward guidance and vice versa.