USD/CHF trades higher near 0.8955 on Tuesday, gaining 0.16% in early European trade as renewed demand for the US Dollar supports the pair. Traders remain focused on Wednesday’s highly-anticipated Federal Reserve meeting, where a 25 basis points rate cut is expected, bringing the federal funds rate to 4.25%-4.50%. Markets will closely scrutinize the Fed’s Summary of Economic Projections, or ‘dot-plot,’ alongside Chair Jerome Powell’s comments to gauge the future pace of monetary easing amid expectations for persistently high inflation and economic resilience under the incoming Trump administration. The possibility of a “hawkish cut” could further bolster the Greenback in the near term.
On the Swiss side, softer-than-expected economic data puts downward pressure on the Swiss Franc (CHF). Switzerland’s Producer and Import Price Index contracted by 0.6% MoM in November, falling short of market expectations for a 0.2% rise. Persistent signs of subdued inflation give the Swiss National Bank (SNB) more flexibility, with investors looking toward Wednesday’s SNB Quarterly Bulletin for fresh clues regarding its stance on monetary policy and inflation forecasts.
Despite USD strength, geopolitical uncertainties in the Middle East could limit the pair’s upside as the safe-haven Swiss Franc remains an attractive hedge. Renewed tensions emerged after Turkey condemned Israel’s expansion plans in the Golan Heights, escalating regional concerns. Such developments, along with ongoing investor caution ahead of critical Fed decisions, may continue to lend CHF a degree of support.
From a technical perspective, USD/CHF needs to clear key resistance at 0.8980 to confirm further upside potential. Immediate support lies at 0.8920, a level that may attract dip buyers if sentiment favors USD strength following the US Retail Sales release later in the session. Market participants will closely watch this data as it could influence short-term USD dynamics ahead of the FOMC policy outcome.
