The USD/CHF pair trades positively around 0.8935 during Monday’s early European session, snapping a two-day losing streak. Support for the US Dollar (USD) stems from the Federal Reserve's (Fed) hawkish monetary policy stance, while the Swiss Franc (CHF) faces pressure from the Swiss National Bank's (SNB) aggressive rate cuts and global economic uncertainties.
Fed’s Hawkish Approach Supports USD
The Fed delivered a 25-basis-point rate cut last week, accompanied by signals of a slower pace of reductions in 2025. The revised projections now pencil in only two rate cuts in 2025, down from four previously anticipated. This reflects the Fed’s ongoing concerns about persistent inflation, boosting the Greenback.
Market participants are also awaiting key US economic indicators, including December Consumer Confidence and the Chicago Fed National Activity Index, which could provide further direction for the USD.
SNB’s Aggressive Rate Cuts Weigh on CHF
In contrast, the Swiss National Bank surprised markets with a 50-basis-point rate cut during its December meeting, exceeding expectations of a smaller reduction. This decision was driven by weaker-than-expected inflation in Switzerland and global economic uncertainties. The aggressive monetary easing has put downward pressure on the CHF, favoring USD/CHF upside momentum.
SNB Chairman Martin Schlegel acknowledged the possibility of further rate cuts in 2024 but ruled out a return to negative interest rates. The central bank remains committed to maintaining inflation within its 2% target range, emphasizing a cautious approach to future policy adjustments.
Geopolitical Risks Bolster CHF’s Safe-Haven Appeal
Geopolitical tensions, including escalating conflicts in the Middle East, could provide some support to the CHF due to its safe-haven status. Recent strikes in Gaza and missile attacks linked to the Houthis underscore the rising instability, potentially limiting the CHF’s downside against the USD.
Technical Levels and Outlook
Upside Resistance: Key resistance for USD/CHF is seen at 0.8950, with a sustained break potentially targeting 0.9000.
Downside Support: Immediate support lies at 0.8900, followed by the psychological level of 0.8850.
While the Fed’s hawkish stance supports USD/CHF’s positive trajectory, the pair faces potential headwinds from CHF’s safe-haven demand amidst geopolitical uncertainties. However, diverging monetary policies between the Fed and SNB are likely to maintain a favorable environment for USD/CHF, keeping the pair above the 0.8900 level in the near term. Traders should monitor upcoming economic data and global developments for further clarity.
コメント