USD/CHF: 2-Year Yield Surges as US Inflation Risks Grow

• Republican Jim Jordan does not have enough votes to be elected House speaker in the first round of floor voting.
• Risk aversion was the early trade as hot data fueled Fed rate hike bets
• Investors await key Chinese data that could alleviate global growth concerns

USD/CHF has been a tough trade over the last week as geopolitical concerns initially sent safe-haven flows toward the franc, but resilient economic data prevented risk aversion from running wild. The movement with Treasury yields are driving concerns that financial conditions are about to have a crippling impact on the economy. The 5-year yield rose to the highest levels since 2007. The 2-year Treasury yield also surged above 5.22%, which is just below the current Fed’s Target range of 5.25%-5.50%.

The USD/CHF daily chart is showing prices tentatively breaking below the 200-day SMA and key support from the bullish trendline that has been in place since August. Wall Street has had a strong start to earnings season, but it seems traders are growing confident that a slowdown is here given how high rates are going. The risks to the US outlook are growing as the risk of more Fed rate hikes remains on the table and as Treasury market liquidity concerns remain a key focal point. If bearish momentum resumes, downside could be the 0.8950 region.

The rest of the week could see risk appetite attempt a comeback if Chinese data impresses. China will have the release of Q3 GDP and September activity data that could show their economic recovery is gaining traction. Too much Fed speak is on the calendar but traders will focus on Thursday’s appearance by Fed Chair Powell. The dollar may fall if he supports the stance that more time is needed to decide if more tightening is needed to tame inflation.

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