Swiss Franc Flat Near Multi-Week Low!
USD/CHF moved relatively stable around 0.7870 at the start of the European session on Monday (May 18), holding near its highest level since April 30. This movement was supported by a strengthening US dollar, while market participants monitored developments in the US-Iran conflict.
The dollar received a boost after US inflation data last week was deemed hotter than expected, prompting the market to re-price the possibility of a Fed interest rate hike in the second half of the year. CME FedWatch showed the probability of a rate hike of at least 25 bps at the December meeting was around 48.4%, up from 14.3% a week earlier.
On the geopolitical front, US President Donald Trump warned Iran on Sunday that "time is running out" amid stalled negotiations. Iranian media also reported that the US response to Tehran's latest proposal lacked concrete concessions, increasing the risk of a protracted conflict.
The combination of interest rate repricing and geopolitical uncertainty is likely to make the USD stronger against the CHF in the near term, as the market prefers assets perceived as more defensive. RBC Capital Markets assesses that the dollar is relatively better protected from global energy shocks than the Swiss franc, as the US operates as a net oil exporter.
Going forward, the market will monitor headlines from US-Iran negotiations, energy price movements, as well as further inflation data and Fed official communications, which could alter interest rate expectations. Meanwhile, the CHF's sensitivity to global risk sentiment remains a determining factor in USD/CHF volatility. (asd)
Source: Newsmaker.id
