The USD/CHF pair trades around 0.8660 during Thursday’s early European session, remaining close to the two-month high of 0.8686, reached on Wednesday. The pair is poised for potential gains as the Swiss Franc (CHF) faces pressure from growing expectations that the Swiss National Bank (SNB) may implement another interest rate cut during its December meeting.
While the Franc could see some temporary support from safe-haven demand, concerns over escalating tensions in the Middle East continue to dominate the geopolitical landscape. On Wednesday, Israeli airstrikes targeted southern Beirut, and US Secretary of State Antony Blinken toured the region, pushing for a ceasefire in both Gaza and Lebanon.
Further complicating the situation, Iran-backed Hezbollah ramped up its military campaign against Israel, using “precision missiles” and deploying new drones against Israeli sites. Hezbollah also claimed responsibility for attacking an Israeli military facility near Tel Aviv, according to Reuters.
Meanwhile, the US Dollar saw a slight decline as US Treasury yields dipped modestly. However, downside risks for the Greenback remain limited, as inflation concerns have tempered expectations of a significant rate cut by the Federal Reserve in November. The CME FedWatch Tool currently indicates an 88.9% likelihood of a 25-basis-point rate cut, with no expectations of a larger 50-basis-point reduction.
Traders will closely monitor Thursday’s release of the S&P Global Purchasing Managers Index (PMI), a key indicator of US private business activity in the manufacturing and services sectors, for further direction.
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