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During early European trading on Tuesday, USD/CHF fell as low as 0.8535. Ongoing geopolitical tensions in the Middle East have provided some support to safe-haven assets such as the Swiss franc (CHF).
Earlier on Tuesday, Iran warned Israel against launching any attacks on the Islamic Republic, a week after Tehran fired a barrage of missiles at Israel, raising fears of a larger war in the Middle East. Investors will closely monitor developments in geopolitical risks in the region. Any signs of escalating tensions could boost safe-haven flows, benefiting the Swiss franc.
On the other hand, an upbeat U.S. jobs report on Friday prompted traders to further scale back their bets on an aggressive interest rate cut by the Federal Reserve in November. This could boost the greenback and limit the downside for USD/CHF.
Bob Parker, senior adviser to the International Capital Markets Association, pointed out that it is unlikely that the Federal Reserve will aggressively cut interest rates. “Yes, there is a case for a modest rate cut, a case for a 25 to 50 basis point cut by January next year, but the case for a 50 basis point cut at the next meeting does not exist,” Parker said.
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