• USD/CHF is expected to extend its gains above 0.9180 considering the strength in the USD Index.
• The lower-than-projected US PPI report weighed heavily on S&P500 and US Treasury yields.
• Fed Harker sees inflation at 2% in CY2025 and a terminal rate in a 5.25-5.50% range despite lower retail demand.

The USD/CHF pair is oscillating in a narrow range below the crucial hurdle of 0.9180 in the early Tokyo session. On Wednesday, the Swiss Franc asset displayed a V-shape recovery after recording a fresh 14-month low at 0.9085 as the United States Producer Price Index (PPI) and retail sales December report remained lower than anticipation. Hawkish commentaries from Federal Reserve (Fed) policymakers remained responsible for infusing strength into the US Dollar again and pushing USD/CHF to near 0.9180.

Declining prices of goods and services at factory gates, according to the US PPI report, triggered the risk of expensive valuation for equities due to lower projections for net profit margins. This forced investors to dump US stocks, which weighed heavily on S&P500 and supported the risk-aversion theme. Also, it sent the return on US Treasury bonds into the bearish territory as the lower Producer Price Index is a pre-requisite for lower Consumer Price Index (CPI) projections. The 10-year US Treasury yields nosedived to 3.37%.

Hawkish commentaries from Fed policymakers came as a savior for the US Dollar Index (DXY). Although Fed policymakers are favoring slowing down the pace of hiking interest rates but expect terminal rate projection steady in a 5.25-5.50% range and achievement of 2% inflation in CY2025, cited by Philadelphia Fed President Patrick Harker, as reported Reuters.

Meanwhile, Swiss franc investors are awaiting the release of the Producer and Import Prices (Dec) data, which is scheduled for Thursday. According to the consensus, annual data will drop to 3.1% vs. the former release of 3.8%. While the monthly data will expand by 0.1% against a contraction of 0.5% released earlier.