USD/CHF strengthens on heightened tension in Middle East, edges lower to near 0.8740

• USD/CHF inches higher on geopolitical tension in the Middle East.
• The US Dollar receives upward support on market caution.
• Market participants await the Swiss CPI data scheduled for Tuesday.

USD/CHF retraces its recent losses as the US Dollar (USD) strengthens amid heightened geopolitical tensions in the Middle East, edging higher to around 0.8740 during Friday’s Asian market session. Israeli airstrikes targeted the southern border city of Rafah on Thursday.

However, the United States (US) has advised Israel against launching a military offensive into Rafah without proper planning, warning that such action could result in a “disaster.” The White House emphasized that it would not support any major operations in Rafah without careful consideration for the refugees residing there. Meanwhile, a Hamas delegation arrived in Cairo on Thursday for ceasefire discussions with mediators from Egypt and Qatar.

The US Dollar Index (DXY) is poised to sustain its recent uptrend for the second consecutive day, hovering around 104.20 as of the latest update. Although the decline in US bond yields may be exerting some downward pressure on the Greenback, its resilience persists. This is primarily attributed to hawkish remarks from US Federal Reserve (Fed) officials, which continue to lend support to the currency.

Federal Reserve Richmond President Thomas Barkin reaffirmed on Thursday that policymakers have the leeway to exercise patience regarding the timing of rate adjustments. He cited a robust labor market and ongoing disinflation influencing this stance. Additionally, Federal Reserve Chair Jerome Powell dismissed the possibility of a rate cut in March during a press conference held after the interest rate decision on January 31.

The non-seasonally adjusted Swiss Unemployment (YoY) Rate rose to 2.5% in January, surpassing the previous figure of 2.3%. Conversely, the seasonally adjusted Unemployment Rate (MoM) held steady at 2.2%, meeting expectations. Market participants eagerly await the release of Swiss Consumer Price Index (CPI) data scheduled for Tuesday, which will be closely monitored for further insights into the economic landscape.

(Note: The title was corrected at 07:40 GMT to say “edges higher to near 0.8740” instead of “lower”.)