- USD/CHF edges lower to 0.8535 in Monday’s early European session.
- The FOMC is anticipated to hold benchmark rates steady in the range of 5.25%–5.50% on Wednesday.
- The escalating Middle East geopolitical tension might lift the safe-haven flow, benefiting the Swiss Franc (CHF).
- The US FOMC and SNB monetary policy meeting on Wednesday and Thursday will be a closely watched events.
The USD/CHF pair loses traction amid the consolidation of the US Dollar (USD) during the early European session on Monday. Traders prefer to wait on the sidelines ahead of the US Federal Open Market Committee's (FOMC) monetary policy meeting on Wednesday, with no change in rate expected. USD/CHF currently trades near 0.8535, losing 0.04% on the day.
The FOMC will announce its interest rate decision on Wednesday. Investors anticipate the FOMC to hold benchmark interest rates steady in the range of 5.25%–5.50% at its March meeting. Financial markets have priced in nearly 75% odds that the FOMC will cut rates in July, according to the CME FedWatch Tools. That being said, the higher-for-longer interest rate narrative in the US might lift the Greenback and create a tailwind for the USD/CHF pair in the near term.
About the data, the University of Michigan reported on Friday that the Consumer Sentiment Index dropped to 76.5 in March from the previous reading and the expectation of 76.9. Meanwhile, the UoM one-year and five-year inflation expectations were unchanged at 3.0% and 2.9%, respectively. Industrial Production rose to 0.1% MoM in February from a 0.5% MoM fall in January.
On the other hand, Anadolu Agency reported that Israeli warplanes launched fresh airstrikes in southern Lebanon on Sunday. Additionally, the Lebanese group Hezbollah said it struck a gathering of Israeli soldiers with “appropriate weapons” near the village of Wazzani, resulting in direct hits. The rising geopolitical tension between Lebanon and Israel, and in the Middle East could boost safe-haven assets like the Swiss Franc (CHF) and cap the upside of the USD/CHF pair.
Apart from this, the Swiss National Bank (SNB) is likely to leave the interest rate unchanged on Thursday. However, Bloomberg economists expect the SNB to lower interest rates sooner than previously predicted, with the first 25 basis points (bps) coming in June.
Moving on, the Swiss Trade Balance for February will be due on Tuesday. On Wednesday, market players will closely watch the FOMC rate decision. The focus will shift to the Swiss National Bank's (SNB) interest rate decision on Thursday. These events could give a clear direction to the USD/CHF pair.
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