Anna 
In a continuous uptrend, USD/CHF marked its fourth consecutive day of gains, reaching around 0.8590 during Tuesday’s European session. The Swiss franc is grappling with challenges spurred by risk aversion, primarily driven by the escalating threat of war in the Middle East. Reports indicate that Iran’s Islamic Revolutionary Guard Corps (IRGC) launched a missile towards northern Iraq, targeting the U.S. consulate in Erbil, intensifying geopolitical tensions in the region.
Amidst the absence of significant data releases from Switzerland, market attention is expected to shift towards the five-day World Economic Forum in Davos. Hosting over 28,000 global leaders, the 54th Annual World Economic Forum could influence market sentiments. Furthermore, Swiss producer and import price data scheduled for release on Friday may offer valuable insights into the economic trends in Switzerland.
The U.S. Dollar Index (DXY) stands higher, nearing 102.90, with the 2-year and 10-year Treasury yields at 4.19% and 3.99%, respectively, at the time of writing. The dollar’s strength received additional support from hawkish remarks by Atlanta Federal Reserve Bank President Raphael Bostic over the weekend. Bostic cautioned against premature interest rate cuts, suggesting that such a move might lead to inflation fluctuations, potentially bolstering USD/CHF.
As the U.S. Dollar strengthened, concerns over the deepening geopolitical conflict between Israel and Gaza triggered market caution, disrupting trade in the Red Sea. Despite recent military interventions by the United States (US) and the United Kingdom (UK) against Houthi bases in Yemen, Iran-backed Houthi groups persist in targeting ships at sea, further fueling risk aversion. Market participants are keenly observing the U.S. New York Empire State Manufacturing Index for January and await comments from Federal Reserve official Christopher J. Waller later on Tuesday, both of which could play pivotal roles in shaping market dynamics.
