- USD/CHF fell to around 0.9030 in early European trading on Tuesday.
- The possibility that the Fed will lower interest rates next year could support the dollar.
- Rising geopolitical tensions in the Middle East could help the Swiss franc by increasing safe-haven flows.
USD/CHF weakened to near 0.9030, snapping a two-day winning streak in early European trading on Tuesday. Cautious sentiment and risk in the region could support stronger currencies like the Swiss franc (CHF). Business conditions were unchanged ahead of the New Year holiday.
The funds could be ahead of expectations that the Fed will slow its rate cuts and that U.S. Treasury yields will rise. Fed officials expect interest rates to fall by 50 basis points (bps) to below 100 basis points in 2025. Federal Reserve Chairman Jerome Powell said the U.S. will look for further inflation in 2025 as policymakers continue to worry about year-over-year record inflation.
On the Swiss front, traders will be closely monitoring developments amid rising tensions in the Middle East. Signs of risk aversion could support safe-haven currencies like the Swiss franc and could follow headwinds for USD/CHF. Israeli forces killed four Palestinians in clashes in the Jabaliya neighborhood of the northern Gaza Strip on Monday. At least 27 people have been killed in attacks in the Gaza Strip.
