The USD/CHF pair moves slightly higher during Monday’s early European session, trading near 0.7820 after posting mild losses in the previous session. The upside is primarily driven by renewed strength in the US Dollar, supported by fading expectations of interest rate cuts from the Federal Reserve.

Persistent inflation concerns, largely fueled by elevated energy prices amid ongoing Middle East tensions, are forcing markets to reassess the Fed’s policy trajectory. Fed Governor Christopher Waller indicated that the labor market’s break-even level is close to zero and warned that a prolonged geopolitical conflict could increase risks to both inflation and employment. Similarly, Mary Daly emphasized that policymakers are closely monitoring whether rising oil prices are feeding into broader inflation trends.

The US Dollar is also benefiting from increased safe-haven demand as tensions between the United States and Iran intensify. According to reports, Iran has criticized recent US actions, including a blockade of its ports, describing them as violations of the ceasefire and acts of aggression. This geopolitical uncertainty continues to underpin demand for defensive assets, such as the US dollar.

However, the Swiss Franc, traditionally viewed as a safe-haven currency, could limit further gains in USD/CHF. Rising geopolitical risks and concerns over prolonged energy-driven inflation may boost demand for the CHF. Additionally, the Swiss National Bank has maintained a cautious stance, with recent meeting minutes highlighting increased uncertainty in the economic outlook.

SNB officials also reiterated their readiness to intervene in foreign exchange markets to prevent excessive appreciation of the Franc, which could cap CHF strength in the near term.

Looking ahead, traders will focus on Switzerland’s upcoming trade balance data and key US releases, particularly Retail Sales, which may provide further direction for the pair. In the near term, USD/CHF is likely to remain sensitive to shifts in geopolitical developments and evolving monetary policy expectations.

Trade Idea:
Buy USD/CHF above 0.7800 targeting 0.7900. Strong USD outlook and reduced Fed cut expectations support upside, though safe-haven CHF demand may limit gains.