The USD/CHF pair encountered downward pressure, reaching 0.9105 during the early European session on Wednesday. This decline was propelled by the weakening of the US Dollar Index (DXY) to 106.20. Furthermore, ongoing geopolitical tensions in the Middle East continued to bolster the Swiss Franc (CHF), a renowned safe-haven currency.
Late Tuesday, National Security Advisor Jake Sullivan announced forthcoming sanctions targeting Iran, along with sanctions against entities supporting the Islamic Revolutionary Guard Corps and Iran’s Defense Ministry. Sullivan emphasized that these measures aim to sustain pressure on Iran’s military capabilities and address its problematic behaviors comprehensively. Amidst this, western leaders urged Israel to exercise restraint to avoid escalation. Investors are closely monitoring developments surrounding tensions between Israel and Iran, as any escalation could bolster safe-haven assets like the CHF and pose challenges for the USD/CHF pair.
Conversely, robust US economic data and hawkish remarks from the US central bank continue to support the Greenback. Federal Reserve Chair Jerome Powell highlighted that the US economy has yet to witness inflation returning to the 2% target and emphasized the need for prolonged restrictive monetary policy. These statements diminished hopes for significant rate cuts this year and buoyed the USD against its counterparts. Market indicators, such as the CME FedWatch Tool, suggest that financial markets have priced in a 67% likelihood of a Fed interest rate cut in September.
