Swiss Franc retains its losses as the June Real Retail Sales data reported at 1.5%, falling short of the anticipated 3.1%. The US Dollar strengthened as traders exercise caution in response to hawkish sentiment from the Federal Reserve. Trump announced a significant agreement involving the disarmament of Hamas and the withdrawal of Israeli forces from Gaza. USD/CHF gains ground after two days of losses, trading around 0.8070 during the Asian hours on Friday.
The pair appreciates as the Swiss Franc remains subdued following the release of Swiss Real Retail Sales data, which came in at 1.5% year-over-year in June, falling short of the expected 3.1% (revised from 3.2%). The prior growth rate was 3.4%, adjusted from 3.5%. Strategists note that the Swiss Franc “met further resistance this week” following reports that the SNB is likely to keep policy unchanged “for an extended period.” They add that they are “surprised the market is reacting to these headlines, given how clear the SNB’s conditional forecasts – which explicitly give this guidance – already are.”
In their view, the “recent rise in global yields has reinforced the franc’s role as a funding currency,” but with “valuations now point[ing] to meaningful recovery potential,” they see scope for the currency to retrace some of its recent underperformance. The USD/CHF pair gains ground as the US Dollar holds gains on market caution, driven by the hawkish sentiment surrounding the Federal Reserve policy outlook, along with the Middle East situation. However, the demand for safe havens may diminish as global risk aversion subsides.
Market sentiment has shown signs of improvement in light of favourable diplomatic developments, particularly in the Middle East, where discussions between the US and Iran are advancing towards securing the Strait of Hormuz. Moreover, US President Donald Trump announced a historic deal outlining the complete disarmament of Hamas and the withdrawal of Israeli forces from Gaza, a breakthrough reportedly confirmed by senior Hamas officials.