- USD/CHF declines as the Swiss franc benefits from increased safe-haven demand.
- President Trump stated that Iran has expressed interest in negotiations following his military warnings, though he cautioned that action might occur prior to any talks.
- Safe-haven demand intensifies amid growing concerns over the Federal Reserve’s independence.
USD/CHF declined for the second consecutive day, trading near 0.7970 during Tuesday’s Asian session. The pair weakened as the Swiss Franc gained support from safe-haven demand driven by geopolitical tensions and worries over the Federal Reserve’s independence.
On Sunday, U.S. President Donald Trump stated that Iran’s leadership had contacted him to seek negotiations following his military threats amid ongoing anti-government protests in the country. However, Trump cautioned that action might be taken before any formal meeting occurs.
Safe-haven demand has risen amid growing concerns over the Federal Reserve’s independence after federal prosecutors threatened to indict Chair Jerome Powell regarding his congressional testimony on a building renovation—an action Powell called an attempt to undermine the central bank’s autonomy.
However, downside pressure on the USD/CHF pair may be limited as the US Dollar maintains strength ahead of the December Consumer Price Index (CPI) release later in the day, which could provide new insights into the Fed’s policy direction.
Markets currently expect two rate cuts from the Federal Reserve this year, beginning in June, though a stronger-than-expected inflation report could reduce the likelihood of easing. December’s Nonfarm Payrolls (NFP) came in below expectations, supporting a more dovish Fed stance. According to the CME Group’s FedWatch tool, there is a 95% chance that the Fed will keep interest rates unchanged at its January 27–28 meeting based on fed funds futures pricing.
Sources: Fxstreet
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