The USD/CHF currency pair maintained stability during the Asian session on Tuesday, hovering around 0.9070, despite fluctuations in the market. The US Dollar experienced notable volatility, largely driven by the events surrounding President Donald Trump’s inauguration. However, the dollar faced downward pressure after Trump signaled a potential shift in US-China relations. Specifically, a possible easing of tariff tensions and a more favorable approach toward China, including discussions over the TikTok deal, contributed to the weakening of the USD.
In the midst of these fluctuations, the US Dollar regained some ground when reports surfaced that Trump intends to direct federal agencies to reassess the nation’s tariff policies and evaluate trade dynamics with key partners such as Canada, Mexico, and China.
The US Dollar Index (DXY), which measures the greenback against six major currencies, stood around 108.30, after pulling back from recent gains. Despite this recovery, the dollar continues to face pressure, especially as US Treasury yields for both 2-year and 10-year bonds remained subdued at 4.23% and 4.54%, respectively, as of the latest data.
The CME FedWatch tool shows that traders expect the Federal Reserve to keep interest rates in the 4.25%-4.50% range through the next three policy meetings. However, speculation suggests that the fiscal policies under Trump’s administration could spark inflationary pressures, possibly limiting the Fed’s options to just one more rate cut.
Meanwhile, the Swiss Franc (CHF) remains relatively weak as market participants anticipate further action by the Swiss National Bank (SNB). With Swiss interest rates already at 0.5%, there is growing expectation that the SNB may continue to reduce rates in response to inflation concerns, which remain below the central bank’s target.
Despite its reputation as a safe-haven asset, the Swiss Franc may face challenges in the current geopolitical climate. As tensions in the Middle East begin to subside, traders are closely monitoring progress on a long-delayed ceasefire agreement between Israel and Hamas, as well as a potential hostage release deal.
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