Swiss Franc remains subdued as traders adopt caution due to Middle East concerns

USD/CHF extends its gains for the fourth successive day, trading around 0.7990 during the Asian hours on Wednesday. The pair may further appreciate as the safe-haven demand could support the US Dollar (USD), which could be attributed to the renewed Middle East tensions.

Iran’s Islamic Revolutionary Guard Corps (IRGC) said it attacked the US Fifth Fleet in Bahrain with drones in response to US strikes on areas in southern Iran. The IRGC warned of “a more severe response” if what it describes as US “aggression” continues.

Earlier, the US launched a third wave of retaliatory strikes on Iranian coastal targets on Wednesday after Iran fired at least three ballistic missiles from Isfahan. This followed an initial round of US strikes on Tuesday, which Washington called a proportional response to Iran downing a US helicopter gunship near the critical Strait of Hormuz.

The Greenback may regain amid uncertainty surrounding the Middle East peace deal continues to fuel concerns over inflation and expectations of elevated interest rates. Stronger-than-expected US May jobs data have boosted expectations of a Federal Reserve (Fed) rate hike this year.

Switzerland's Consumer Price Index came in at 0.6% for May, missing the 0.8% consensus forecast and effectively dampening any near-term rate-hike expectations by the Swiss National Bank (SNB).

Despite the slight year-over-year rise, SNB Chairman Martin Schlegel reassured the markets that medium-term inflationary pressures remain entirely stable. As a direct result of this mild inflationary environment, investors have solidified their outlook for Swiss monetary policy, widely expecting the central bank to hold its benchmark interest rate steady at 0% through 2026.