The USD/CHF pair seesawed between tepid gains/minor losses through the early European session and was last seen trading with modest losses, around the 0.9180-75 region.
Having struggled to find acceptance above the 0.9200 mark on Friday, the USD/CHF pair witnessed some selling on the first day of a new trading week and was pressured by the risk-off impulse. Worries that the fast-spreading Delta variant of the coronavirus could derail the global economic recovery weighed on investors’ sentiment. This was evident from a generally weaker tone around the equity markets, which benefitted the safe-haven Swiss franc and acted as a headwind for the USD/CHF pair.
Meanwhile, the global flight to safety triggered a sharp fall in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond reversed a major part of the last week’s gains to the 1.30% threshold. This, in turn, kept the US dollar bulls on the defensive and collaborated to cap the upside for the USD/CHF pair. That said, the downside remains cushioned as investors now seemed reluctant to place any aggressive bets ahead of the upcoming FOMC meeting, starting Tuesday.
The Fed is scheduled to announce its latest monetary policy decision during the US session on Wednesday. The outcome will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the USD/CHF pair. In the meantime, developments surrounding the coronavirus saga will drive the broader market risk sentiment. This, in turn, should allow traders to grab some short-term opportunities amid absent relevant market-moving US economic releases.