USD/CHF retreats to 0.9700 area ahead of key US data
- USD loses strength after FOMC Chairman Powell's remarks.
- US GDP in fourth quarter is expected to expand by 2.1% annually.
- Fears over coronavirus weighing on global economy continue to hurt sentiment.
The USD/CHF pair rose to its highest level of 2020 at 0.9767 on Wednesday but erased the majority of its daily gains after the FOMC Chairman Jerome Powell's remarks on policy outlook weighed on the greenback. After closing the day virtually unchanged at near 0.9730, the pair edged lower on Thursday and was last down 0.15% on the day at 0.9715.
Powell keeps USD's gains in check
After the FOMC decided to keep its policy rate unchanged within 1.5% - 1.75% range in January as expected. During the press conference, FOMC Chairman Powell noted that they have not yet seen a decisive recovery in the manufacturing sector and added that they are not satisfied with inflation running below the 2% target level.
"Change in inflation language in policy statement reflects the need for clear signal Fed does not want inflation persistently below 2%," Powell explained. The US Dollar Index, which rose to 98.20 on Wednesday, is now testing the 98 handle, erasing 0.05% on a daily basis.
In the second half of the day, the US Bureau of Economic Analysis will release the fourth-quarter GDP data, which is expected to show that the economic activity expanded by 2.1% on a yearly basis.
In the meantime, the death toll from the coronavirus outbreak continues to rise on Thursday and investors remain concerned about the potential negative impact of the outbreak on the global economy. Major European equity indexes are suffering heavy losses and the 10-year US Treasury bond yield is erasing nearly 2% on the day.
Technical levels to watch for