10 Dec 2024

USD/CHF has declined to 0.8770 during the early European session on Tuesday, reflecting a decrease of 0.19% for the day. The Swiss National Bank is expected to reduce its key policy rate by 25 basis points on Thursday. Additionally, the employment data from the United States released on Friday has led to expectations of a Federal Reserve rate cut in the upcoming week.

The USD/CHF currency pair has experienced a notable decline, reaching approximately 0.8770 during the early hours of the European session on Tuesday. This movement reflects a strengthening of the Swiss Franc (CHF), which is largely attributed to escalating unrest in the Middle East. The turmoil in the region has led to a heightened demand for safe-haven assets, with investors seeking refuge in currencies perceived as more stable, such as the CHF.

This week is particularly significant for market participants, as attention turns to the upcoming release of the US Consumer Price Index (CPI) data for November, alongside the interest rate decision from the Swiss National Bank (SNB). These events are expected to have a substantial impact on currency valuations and market sentiment.

The situation in the Middle East has intensified dramatically over the weekend, particularly with the news that Syrian President Bashar al-Assad and his family have sought refuge in Moscow, where they have been granted political asylum. This development marks a pivotal moment, signaling the potential end of a 50-year oppressive regime in Syria. The possible collapse of Assad's government raises concerns about regional stability and could trigger further conflicts in the area. As a result, there is an increased demand for safe-haven currencies, including the CHF, as investors look to mitigate risk in an uncertain geopolitical landscape. Analysts from ANZ Group Holdings have commented on this trend, noting, "The government's collapse in Syria could see haven demand flowing in," highlighting the potential for increased capital inflows into the Swiss Franc.

On the monetary policy front, the SNB is widely expected to announce a reduction in its key policy rate by 25 basis points (bps) during its upcoming meeting on Thursday. A recent survey conducted by Reuters revealed that over 85% of economists anticipate the Swiss central bank will lower its main rate to 0.75%. This expectation is based on the prevailing economic conditions and the SNB's cautious approach to monetary policy. Christian Schulz, the deputy chief European economist at Citi, has indicated that the SNB is likely to revise its short-term forecasts downward, stating, "The SNB's guidance will likely remain dovish." Such a dovish stance could potentially weaken the CHF, providing some support for the USD/CHF pair as traders adjust their positions in response to the central bank's decisions.

In contrast, traders have been adjusting their expectations regarding the US Federal Reserve's monetary policy, particularly in light of the recent US employment report released on Friday. The report indicated a rise in job growth for November, which is generally a positive