- USD/CHF trades weaker around 0.8535 in the early European session on Tuesday, down 0.16% on the day.
- Rising tensions in the Middle East support the safe-haven Swiss franc.
- Fading hopes for a big US rate cut could limit the pair’s decline.
The USD/CHF pair retreats near 0.8535 during the early European session on Tuesday. The ongoing geopolitical tensions in the Middle East provide some support to safe haven assets like the Swiss Franc (CHF).
Earlier Tuesday, Iran warned Israel against any attack on the Islamic Republic a week after Tehran launched a barrage of missiles at it, raising fears of a broader war in the Middle East. Investors will closely monitor the development of geopolitical risks in the region. Any sign of escalating tensions could boost flows into safe haven assets, benefiting the CHF.
On the other hand, Friday’s upbeat US jobs report led traders to further reduce expectations of a large interest rate cut by the Federal Reserve (Fed) in November. This could boost the Dollar and limit the decline of USD/CHF.
Bob Parker, senior adviser at the International Capital Markets Association, said the case for aggressive Fed rate cuts is unlikely. “Yes, there is a case for modest rate cuts, there is a case for 25 to 50 basis point cuts by January of next year, but a case for 50 basis point cuts at the next meeting simply does not exist,” Parker said.
There is now a nearly 86.0% chance that the Fed’s federal funds rate target range will be cut by a quarter percentage point to 4.5% to 4.75% in November, according to the FedWatch tool. CME Group. Meanwhile, the probability of the rate remaining at 4.75% to 5% is 14.0%. Investors will take further cues from US Consumer Price Index (CPI) inflation data, due out on Thursday. This report could offer some clues about the path of inflation in the US and influence the Fed on the future outlook for US interest rates.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
