The Swiss Franc (CHF) is finding renewed support as global risk sentiment deteriorates, driven by escalating geopolitical tensions and persistent uncertainty surrounding the US monetary policy outlook. Heightened demand for safe-haven assets has tilted flows toward the Franc, complicating attempts by USD/CHF to sustain upside momentum.

Geopolitical risks remain front and center. Developments in Eastern Europe have added a fresh layer of uncertainty after Russia’s foreign minister stated that Moscow’s negotiating position would change following alleged attacks near President Vladimir Putin’s residence. The comments have fueled concerns that diplomatic channels may narrow further, increasing the risk of a prolonged or intensified conflict between Russia and Ukraine.

At the same time, instability in the Middle East has intensified. Saudi Arabia has reportedly conducted air strikes in Yemen, while Iran has declared what it described as a “full-scale war” against the United States, Europe, and Israel. These tensions were amplified by warnings from former US President Donald Trump, who cautioned that further strikes could follow should Iran attempt to rebuild its nuclear program. Collectively, these developments have pushed investors toward defensive positioning, benefiting traditional havens such as the Swiss Franc.

On the monetary policy front, the US Dollar is struggling to attract sustained demand. Markets continue to price in the likelihood of additional easing by the Federal Reserve in the medium term, with expectations centered on two more rate cuts in 2026. According to the CME FedWatch tool, the probability that the Fed will keep interest rates unchanged at its January meeting has risen to 83.9%, up from 80.1% a week earlier. Meanwhile, the likelihood of a 25-basis-point cut has declined to 16.1%, reflecting reduced expectations for near-term easing but not eliminating longer-term dovish bets.

Investors remain cautious ahead of the release of the Federal Open Market Committee (FOMC) December Meeting Minutes later in the day. The Minutes are expected to provide deeper insight into policymakers’ views on inflation, growth risks, and the potential rate path into 2026. Any indication of increased concern over economic momentum could further weigh on the US Dollar.

Looking ahead, attention will also turn to US Initial Jobless Claims data due Wednesday, which may offer fresh clues about labor market conditions. Until clearer signals emerge, USD/CHF is likely to remain sensitive to shifts in risk sentiment, with safe-haven flows continuing to favor the Swiss Franc.

Trade Idea:
Sell USD/CHF on rebounds toward 0.8850, targeting 0.8720, with a stop above 0.8920, as geopolitical risks and Fed uncertainty continue to support CHF demand.