- USD/CHF flat lines around 0.8810 in Tuesday’s early European session.
- Geopolitical risks in the Middle East could boost the safe haven flows, benefiting the Swiss Franc.
- The Fed and SNB interest rate decisions will be the highlights later this week.
The USD/CHF pair trades on a flat note near 0.8810 during the early European session on Tuesday. The potential upside of the pair might be limited due to the heightened economic uncertainty and rising geopolitical tensions in the Middle East.
The US Dollar Index (DXY), an index of the value of the USD relative to a basket of foreign currencies, currently edges higher to 103.55, adding 0.13% on the day. The Greenback got support from US Retail Sales on Monday that showed a modest rebound in February after a revised 1.2% decline in January.
Markets expect the US Federal Reserve (Fed) to hold interest rates at its March meeting on Wednesday, with the next cut in June. The US central bank will give its new economic projections after the rate decision, which might offer some hints about how officials view the likely impact of US President Donald Trump’s policies and US economic outlook.
On the other hand, the escalating geopolitical tensions in the Middle East could boost the safe haven currency like the Swiss Franc (CHF) and create a headwind for USD/CHF. On Tuesday, Israeli Prime Minister Benjamin Netanyahu said in a statement, “From now on, Israel will act against Hamas with increasing military force.” The order came after the militant group refused to release our hostages and rejected all offers it received from the US presidential envoy and the mediators.
The Swiss National Bank (SNB) is anticipated to cut its main policy rate by a quarter percentage point on Thursday to 0.25% and hold it there until at least 2026, according to most economists polled by Reuters. “Previously there had appeared to be a reasonable chance of the SNB cutting to zero or below, but those chances now look slim,” said Adrian Prettejohn, Europe economist at Capital Economics.
