USD/CHF slips to near 0.8300 as US yields fall, focus on US-China trade talks

• USD/CHF faces pressure as the US Dollar weakened, dragged down by a decline in US yields.
• US Treasury yields may recover on improving global trade sentiment and fading odds of imminent Fed rate cuts.
• SNB Chair Martin Schlegel signaled the central bank remains open to further rate cuts if economic conditions warrant it.

USD/CHF edged lower during Asian trading on Friday, hovering around 0.8310 after posting gains in the previous two sessions. The pair came under pressure as the US Dollar (USD) softened, weighed down as US Treasury yields declined. At the time of writing, the 2-year and 10-year yields were at 4.36% and 3.86%, respectively.

However, US yields had earlier found support from improving global trade sentiment and reduced expectations for near-term Federal Reserve (Fed) rate cuts. Market confidence was buoyed after President Donald Trump announced a preliminary trade deal with the UK, marking the first agreement since the US imposed broad tariffs last month.

Focus now shifts to preliminary US-China trade discussions scheduled for this weekend in Switzerland. However, both sides have played down the likelihood of any significant breakthrough. Trump has maintained a firm stance on China, underscored by the appointment of a new envoy to Beijing. Although talks regarding potential tariff exemptions are ongoing, Trump emphasized that the US is "not looking for so many exemptions."

Meanwhile, Chinese Vice Foreign Minister Hua Chunying reaffirmed China's resilience, stating the country has "full confidence" in managing trade tensions with the US and the capability to weather ongoing challenges.

On the Swiss front, expectations for further interest rate cuts by the Swiss National Bank (SNB) intensified after Chair Martin Schlegel suggested the central bank is ready to cut rates further if needed. Schlegel also hinted at the potential return of zero or negative rates amid continued economic uncertainty.

Swiss inflation data added to the dovish outlook, with April's Consumer Price Index showing zero year-on-year growth and core inflation declining sharply, heightening speculation of a rate cut at the SNB's June 19 meeting.