News Maker 23

The USD/CHF pair strengthened again during Monday's trading (Oct 12) after recording declines in the previous two sessions. USD/CHF traded around 0.8310 during the Asian session, with the Swiss franc under pressure as investors increased short positions against the currency. This movement was primarily driven by the divergence in monetary policy paths between the Swiss National Bank (SNB) and other major central banks.

The SNB maintained its benchmark interest rate at 0% in September. SNB Vice Chairman Martin also stated that there was no immediate need for policy adjustments, citing low and stable inflation alongside limited risks of economic spillovers. This stance has made the Swiss franc relatively less attractive compared to currencies of nations where the possibility of monetary tightening remains on the table.

From a technical perspective, UOB Group analysts assess that USD/CHF remains in a consolidation phase. They maintain the view that the pair is likely to trade within the 0.8245 to 0.8365 range over the next one to three weeks. This implies that the current strengthening of USD/CHF does not yet signal a strong trend reversal and that the pair may still face resistance near the upper end of that range.

Meanwhile, the US dollar's strength is beginning to face headwinds from domestic economic data. The preliminary University of Michigan Consumer Sentiment index fell to 46.3 in October from 48.1 in September, coming in below the expected 47.6. The data signals weakening US consumer confidence, potentially easing pressure on the Federal Reserve to raise interest rates in the near term.

Market expectations regarding Fed policy have also shifted. According to the CME FedWatch tool, the probability of an interest rate hike of at least 25 basis points in October dropped to approximately 17.7% from 24.4% the previous week. However, the market still anticipates an 84.1% probability of a rate hike in December. Meanwhile, geopolitical risks have returned to the spotlight after US President Donald Trump stated he was considering US involvement in Saudi military action against the Iran-backed Houthi group in Yemen.

Newsmaker Analysis: The USD/CHF pair is currently caught in a tug-of-war between pressure on the US dollar and the weakness of the Swiss franc resulting from the Swiss National Bank's (SNB) persistently dovish policy. In the short term, geopolitical risks could support the dollar as a safe-haven asset; however, weakening US consumer sentiment and diminishing odds of an October interest rate hike act as headwinds against a USD/CHF rally. As long as the pair remains within the 0.8245–0.8365 range, its movement is likely to be consolidative, with its future direction heavily dependent on US economic data, Federal Reserve expectations, and developments in the Middle East conflict. (asd)

Source: Newsmaker.id