Greenback Strength Pushes USD/CHF Past 0.8900 After Fed Signals

Image Credit: The New York Ledger

The USD/CHF pair climbs to around 0.8935 during the early European session on Monday, reversing a two-day losing streak. The US Federal Reserve’s (Fed) hawkish rate cut supports the US Dollar (USD), while traders focus on upcoming US economic data, including December's Consumer Confidence and the Chicago Fed National Activity Index, set for release later in the day.  

Last week, the Fed reduced interest rates by 25 basis points and scaled back its forecast for 2025 rate cuts to two, down from four. The Fed’s cautious tone, driven by concerns about persistent inflation, bolsters the Greenback against the Swiss Franc (CHF).  

Conversely, the Swiss National Bank (SNB) surprised markets by cutting its key interest rate by 50 basis points during its December meeting, surpassing expectations of a smaller reduction. This decision reflects weaker-than-anticipated inflation in Switzerland and growing global economic uncertainties. The SNB's more aggressive easing compared to the Fed may weigh on the CHF, offering further support to the USD/CHF pair.  

SNB Chairman Martin Schlegel indicated that further rate cuts could be considered next year, though he emphasized it is now less likely that rates would drop below 0%. Schlegel stated, “We will continue to closely monitor the situation and adjust monetary policy as needed to ensure inflation remains consistent with medium-term price stability.”  

Geopolitical tensions in the Middle East may provide some support for the safe-haven CHF. Israeli strikes in the Gaza Strip over the weekend reportedly killed at least 50 Palestinians, including at a family home and a school, according to Palestinian medical officials. Meanwhile, the Houthis claimed responsibility for a missile attack, stating they had launched a hypersonic ballistic missile targeting a military site.

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