The USD/CHF pair continues its upward trajectory for the fourth consecutive session, reaching around 0.8590 during Tuesday’s European trading hours. The Swiss Franc (CHF) is grappling with challenges in the face of escalating geopolitical tensions in the Middle East, contributing to a risk-off sentiment. Reports of a missile launch by Iran’s Islamic Revolutionary Guard Corps (IRGC) targeting northern Iraq near the US Consulate in Erbil have added to the apprehension in the market.
Amid a lack of significant data releases from Switzerland, market participants are turning their attention to the ongoing five-day World Economic Forum in Davos. The 54th World Economic Forum Annual Meeting has attracted over 28,000 global leaders, providing a platform for crucial discussions on international economic issues. Additionally, Swiss Producer and Import Prices data scheduled for release on Friday are expected to offer insights into the prevailing economic trends in Switzerland.
The US Dollar Index (DXY) is trading higher, nearing 102.90, supported by 2-year and 10-year yields on US Treasury coupons standing at 4.19% and 3.99%, respectively, at the time of writing. The strength of the US Dollar is further bolstered by hawkish comments from Atlanta Federal Reserve (Fed) President Raphael Bostic. Bostic’s remarks over the weekend, suggesting potential inflation repercussions if interest rates are reduced prematurely, provide underlying support to the USD/CHF pair.
Against a backdrop of heightened geopolitical tensions between Israel and Gaza disrupting trade in the Red Sea, the US Dollar gains strength. Ongoing targeting of maritime vessels by the Iran-backed Houthi group, despite recent military strikes by the United States (US) and the United Kingdom (UK) on Houthi sites in Yemen, is intensifying the risk-off sentiment in the market. Market participants are closely monitoring the US NY Empire State Manufacturing Index for January and a speech by Federal Reserve official Christopher J. Waller later on Tuesday, anticipating potential impacts on market dynamics.
