Swiss Franc steadies against Dollar as US-Iran tensions counter shifting Fed outlook
USD/CHF holds ground after registering modest gains in the previous day, trading around 0.8090 during the Asian hours on Friday. The pair could rise as the US Dollar (USD) receives support from escalating developments surrounding conflicts in the Middle East.
Reuters reported on Thursday that Iran has instructed Yemen’s Houthi militia to stand ready to close the critical Red Sea oil route if the United States strikes Iranian power infrastructure, presenting a potent new threat to global energy supplies. Amplifying these concerns, the Tasnim news agency reported explosions in Bandar Abbas, Qeshm, and Ahvaz, while very loud explosions were also heard in Kuwait and as far away as Basra.
However, the Greenback could face challenges as softer-than-expected US inflation prompted traders to scale back expectations of near-term Federal Reserve rate hikes. Economic data released earlier this week showed US consumer inflation increased less than expected in June, while producer prices unexpectedly fell. Meanwhile, initial jobless claims dropped to two-month lows. Markets have now largely ruled out a Fed rate hike this month, though expectations remain split over the possibility of a move in September.
The USD/CHF pair could lose ground as the Swiss Franc (CHF) may receive support amid escalating hostilities in the Middle East. Renewed tensions have pushed oil prices higher, prompting markets to reassess the outlook for global growth, inflation, and monetary policy.
The Swiss National Bank left its policy rate unchanged at 0% in June, stating that the medium-term inflation outlook had changed little. However, the meeting minutes revealed that policymakers acknowledged geopolitical tensions had increased near-term inflation risks.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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