The USD/CHF pair is on the rise as the Federal Reserve considers delaying rate cuts to manage inflation. The CME FedWatch Tool shows a slight decrease in the odds of a rate cut in September, from 68.5% to 67.7%. The Swiss Franc, on the other hand, may see some support amidst political and geopolitical uncertainty leading to safe-haven flows.
USD/CHF is trading around 0.8960, with the US Dollar gaining strength due to expectations of a delay in rate cuts by the Fed. Fed Governors Michelle Bowman and Lisa Cook have differing views on the timing of rate cuts, with Bowman suggesting holding rates steady to control inflation. The Greenback is also supported by potential risk aversion ahead of key US economic data releases this week.
On the Swiss side, the Swiss Franc may benefit from political uncertainty in France and the rise of far-right parties in European Parliament elections. Geopolitical tensions in the Middle East and Ukraine could further drive investors towards safe-haven assets, including the CHF. The yield on the 10-year Swiss government bond has dropped to its lowest level since August 2022.
In addition, ongoing tensions in the Middle East and Ukraine, such as the Israeli attack on Hamas in Gaza and Russia’s condemnation of a US strike in Crimea, could amplify the flight to safety, favoring the Swiss Franc.