The USD/CHF currency pair saw some dip-buying during the Asian session on Monday, trading around 0.8660-0.8665, just below last week’s peak.
The US Dollar began the week on a positive note, buoyed by hawkish comments from Federal Reserve Governor Michelle Bowman. Speaking on Sunday, Bowman suggested that the Fed might hold off on rate cuts in September and highlighted ongoing inflation risks due to strong labor market conditions. This stance, coupled with a positive tone in equity markets, has undermined the safe-haven Swiss Franc (CHF) and supported the USD/CHF pair.
However, geopolitical risks continue to weigh on market sentiment. The Israel Defense Forces (IDF) intercepted around 30 projectiles early Monday morning that crossed from Lebanon into northern Israel. Additionally, heightened alerts in Western Iran suggest a potential imminent threat to Israel, further dampening market optimism.
Expectations of potential future rate cuts by the Fed could also limit aggressive bullish bets on the USD, capping the upside potential for the USD/CHF pair. Traders appear cautious, preferring to stay on the sidelines ahead of the upcoming US inflation reports—the Producer Price Index (PPI) and Consumer Price Index (CPI) set for Tuesday and Wednesday, respectively.
Given the current economic and geopolitical backdrop, it may be prudent to await further buying momentum before considering an extension of the USD/CHF pair’s recent recovery from the 0.8430 level, the lowest point touched earlier this year.
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