• USD/CHF has been offered at 0.9515 as DXY loses strength amid risk-on impulse.
• The Fed is focusing on squeezing liquidity through rate hikes and balance sheet reduction.
• An unchanged interest rate policy is likely by the SNB despite soaring inflation.

The USD/CHF pair has been corrected to 0.9495 after a sharp upside rally right from the first tick in early Tokyo. The pair have remained in positive territory since the first trading session of April amid a spree of hawkish comments from the Federal Reserve (Fed) policymakers.

A divergence in the ideology of the Fed and SNB (Swiss National Bank) is continuously underpinning the Swiss franc against the mighty greenback. Where SNB is keeping its policy rates at -0.75% despite the 13-year high inflation print at 2.2% due to higher commodity prices, the Fed is focusing on shrinking the liquidity from the market at a higher pace.

San Francisco Fed President and Federal Open Market Committee (FOMC) member Mary Daly on Wednesday stated that the case for a 50 bps interest rate hike in May is now "complete" and that the Fed can also dictate the reduction of its balance sheet at the next meeting, as per Reuters.

Meanwhile, the US dollar index (DXY) is losing strength and is likely to re-test Wednesday’s low at 100.22. The positive market sentiment is hurting the demand for safe-haven assets. A firmer slippage below the previous trading session may bring a short-term reversal in the asset. The market participants are awaiting the speech from Fed chair Jerome Powell, which is likely to provide guidance about the extent of the rate hike and the status of important macroeconomic data.