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Swiss franc rises as USD softens despite Fed hike odds
USD/CHF trades near 0.8140 while Middle East tensions and FedWatch pricing keep the pair in focus ahead of Swiss inflation data and US CPI.
USD/CHF pulled back from two days of gains and was trading around 0.8140 during Tuesday’s Asian session, reflecting a softer US dollar, according to FXStreet.
FXStreet said traders are expected to watch Swiss Producer and Import Prices for June later in the day. It also noted the pair’s downside may be limited by safe-haven demand for the dollar as Middle East tensions intensify, after the US Central Command announced new precision strikes on Iranian military targets and Iran’s IRGC said two tankers were disabled in the Strait of Hormuz.
The outlet linked the heightened risk to a rise in oil prices and concerns that energy-driven inflation could keep the Federal Reserve’s policy rate elevated. It added that rate expectations have shifted, with the CME FedWatch Tool showing a 51.0% probability of a Fed rate hike in September, compared with a 23.0% chance that rates would stay on hold.
FXStreet also pointed to Tuesday’s US June CPI release and expectations for headline inflation to decline 0.1% month on month while core inflation is seen rising 0.3%. The piece said traders will also scrutinize Fed Chair Kevin Warsh’s congressional testimony for clues on whether the Fed will validate markets’ growing hawkishness.