USD/CHF Remains Stable Around 0.8800 as Traders Look Towards Fed and SNB Rate Moves Under Geopolitical Uncertainty
The USD/CHF currency pair holds stable at around the 0.8810 mark in early European trading on Tuesday amid geopolitical uncertainty, as traders keep an eye out for pivotal monetary policy actions by the US Federal Reserve and Swiss National Bank (SNB) later this week. While the US Dollar draws modest support from better-than-anticipated retail sales and a marginal increase in the Dollar Index (DXY), increasing Middle Eastern geopolitical tensions are driving safe-haven flows into the Swiss Franc, possibly capping the pair’s upside potential. Market players overwhelmingly anticipate the Fed to leave rates stationary, while the SNB is expected to reduce its policy rate by 25 basis points, adding more interest in USD/CHF’s near-term direction. KEY LOOKOUTS • The Federal Reserve is expected to keep interest rates unchanged on Wednesday, with an eye on revised economic projections that could offer clues on the timing of future rate cuts. • The Swiss National Bank is expected to lower its key policy rate by 25 basis points on Thursday, with expectations of leaving it unchanged until at least 2026. • Escalating tensions in the Middle East, specifically Israel’s military buildup, could increase safe-haven demand for the Swiss Franc, exerting downside pressure on USD/CHF. • The US Dollar Index (DXY) is backed by a recovery in US retail sales, but any further move will wait for Fed cues and subsequent macroeconomic data. The USD/CHF cross is trading steadily around the 0.8810 level as traders await key central bank announcements from the US Federal Reserve and the Swiss National Bank (SNB) later this week. Although the US Dollar is mildly supported by a recovery in retail sales and a firmer Dollar Index (DXY), the upside for USD/CHF is capped by rising geopolitical tensions in the Middle East, which are increasing safe-haven demand for the Swiss Franc. Markets anticipate the Fed to leave interest rates on hold while releasing new economic forecasts that may influence future rate expectations. In the meantime, the SNB is expected to lower its policy rate by 25 basis points, a move that could impact the pair’s short-term movement. USD/CHF remains flat around 0.8810 as traders wait for critical interest rate announcements from the Fed and SNB this week. Although the US Dollar finds some support in retail sales figures, increasing geopolitical tensions in the Middle East enhance safe-haven demand for the Swiss Franc. • USD/CHF is flat around 0.8810 in early European trading on Tuesday. • Investors expect important interest rate decisions from the US Federal Reserve (Wednesday) and the Swiss National Bank (Thursday). • The US Dollar Index (DXY) advances to 103.55 on the back of a recovery in US retail sales figures. • Markets are expecting the Fed to remain unchanged, with possible rate reductions likely from June. • The SNB is expected to lower its policy rate by 25 basis points to 0.25%, according to economist expectations. • Geopolitical tensions in the Middle East, particularly Israel’s heightened military activity, are driving demand for safe-haven currencies such as the Swiss Franc. • Safe-haven flows and uncertainty in global markets can limit the near-term upside potential for the USD/CHF pair. The USD/CHF exchange rate is holding firm as global investors turn their attention to two key central bank announcements this week — the US Federal Reserve and the Swiss National Bank (SNB). Investors are keenly monitoring the results of the Fed meeting, which is expected to leave interest rates untouched. The economic forecasts of the central bank will also be significant, as they might provide some clues towards the US economy outlook and possible rate cuts in the later part of this year. Meanwhile, recent US retail sales data registered a modest rebound, providing some support to the overall sentiment of the market. USD/CHF Daily Price Chart Chart Source: TradingView Meanwhile, the spotlight is also on the SNB, which is expected to reduce its key policy rate. The policy action may herald a change in the Swiss economic sentiment and will have an important influence on forming market expectations in the future. Further, growing geopolitical tensions in the Middle East have seen a rise in demand for safe-haven currencies such as the Swiss Franc. Words from world leaders and rising tensions are still holding markets in reserve, creating yet another level of sophistication for this week’s central bank-driven news. TECHNICAL ANALYSIS USD/CHF is ranging narrowly around the 0.8810 mark, reflecting indecision on the part of traders prior to important central bank announcements. The pair is close to its short-term moving averages, which reflects a lack of strong momentum in either direction. A continued break above the near resistance at 0.8840 would set the stage for more upside towards the 0.8880–0.8900 area. On the other hand, support on the first hit is at 0.8780, and it has more robust support at the 0.8740 level. The technical indicators RSI and MACD are also neutral, supporting the period of consolidation until a positive directional break. FORECAST If the US Federal Reserve leans more towards hawkishness during its next policy meeting or communicates a postponement of interest rate reductions, the US Dollar could further appreciate. A strong economy underpinned by recent indications, including the recovery in retail sales, may also help bolster positive sentiment toward the Greenback. Under such circumstances, USD/CHF may experience upwards direction, provided that the Swiss National Bank follows through with a rate cut and further increases the interest rate spread between the US and Switzerland. Alternatively, escalating Middle Eastern tensions may continue to fuel safe-haven demand for the Swiss Franc, exerting pressure on the USD/CHF pair. In addition, if the SNB adopts less dovish positioning than anticipated or suggests maintaining rates unchanged for a longer duration than expected, this may make the Swiss Franc stronger. Any news of slowing economies or dovish forecasts by the Fed will also bear on the US Dollar and add to the potential short-term downside risk of USD/CHF.