The USD/CHF pair has softened to approximately 0.7650 during the early European session on Thursday. The US Dollar faces pressure from unpredictable trade policy, concerns regarding the independence of the Federal Reserve, and various geopolitical risks. The Federal Reserve maintained the benchmark federal funds rate at its existing range of 3.5% to 3.75% during the January meeting. The USD/CHF pair sees a wave of selling pressure near 0.7650 in the early European session on Thursday. Concerns regarding the independence of the Federal Reserve, apprehensions about a potential US government shutdown, and persistent geopolitical tensions are contributing to the strength of safe-haven currencies like the Swiss Franc against the US Dollar.
Later in the day, the Swiss December Trade Balance and the US weekly Initial Jobless Claims will be published. A partial U.S. government shutdown appears more probable this weekend, given that federal funding for specific agencies is scheduled to lapse after January 30. On Wednesday, The New York Times reported that US President Donald Trump and Democratic Senator Chuck Schumer engaged in discussions aimed at potentially reaching an agreement to negotiate new restrictions on federal immigration agents.
In the interim, US aircraft carriers along with their accompanying warships have positioned themselves in the Middle East. On Wednesday, Trump called on Iran to engage in negotiations for a “fair and equitable deal,” warning that any subsequent US attack would be significantly more severe. Increased tensions between the US and Iran may lead to an uptick in safe-haven flows.
As anticipated, the Fed on Wednesday opted to maintain interest rates at their current level, halting a series of three consecutive rate reductions in light of prevailing uncertainties surrounding the labor market and inflation. At a recent press conference, Fed Chair Jerome Powell articulated that policymakers “see the current stance of monetary policy as appropriate to promote progress toward both our maximum employment and 2% inflation goals.” The prudent approach adopted by the US central bank could serve to mitigate the potential depreciation of the USD in the short run.