USD/CHF Strengthens, Market Weighs Fed Hold and Energy Inflation Risks
USD/CHF strengthened again and held around 0.7850 during the Asian session, reversing the previous two days' weakness. This movement occurred as the US dollar tended to stabilize as the market chose to hold positions ahead of the Federal Reserve's interest rate decision.
The market widely expected the Fed to hold rates in the 3.50%–3.75% range. Since the "hold" decision was widely expected, investor focus shifted to Fed Chair Jerome Powell's comments on how surging oil prices and the risk of energy inflation could influence future policy direction.
From a geopolitical perspective, tensions in the Middle East remained the main driving force. The US military strike on an Iranian coastal location near the Strait of Hormuz and Israel's claim of an attack that killed a senior Iranian official kept energy risks elevated. These conditions typically support the dollar through risk-off and expectations of tighter interest rates for longer.
However, USD/CHF also faced resistance from the Swiss franc. The CHF tends to benefit when safe-haven demand increases, but its room for strengthening may be limited after the Swiss National Bank (SNB) signaled greater readiness to intervene in the foreign exchange market to prevent deflationary pressures. The SNB itself is expected to hold its policy interest rate at 0% on Thursday.
Impacts that market players need to monitor:
If Powell is hawkish (reducing inflation risks), the USD could continue to strengthen, and USD/CHF has the potential to remain high.
If Powell is dovish, the USD could soften, and USD/CHF is at risk of falling again, especially if haven demand for the CHF increases.
Oil remains key: if energy rises again, the market tends to hold back expectations of interest rate cuts and support the USD.(CP)
Source: Newsmaker.id
