USD/CHF flat as Fed outlook and Oil-driven USD demand limit downside

The Swiss Franc (CHF) trades flat against the US Dollar (USD) on Friday, reversing part of its earlier gains as the Greenback eases slightly from daily highs. At the time of writing, USD/CHF is trading around 0.7878 after briefly touching the 0.7900 mark.

 Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading near 99.54 after retreating from an intraday high of 99.79.

Despite the modest pullback in the Greenback, it remains up nearly 0.30% on the day, limiting follow-through selling pressure in USD/CHF. However, the Franc remains relatively firm across the board on Friday, outperforming most major peers, though it lags the USD, which has attracted renewed demand since the US-Israel war with Iran escalated.

The Swiss Franc initially strengthened as the Middle East conflict erupted, supported by safe-haven demand. However, gains faded quickly after the Swiss National Bank (SNB) signaled a willingness to intervene in the FX market, prompting traders to trim long CHF positions.

Geopolitical tensions in the Middle East continue to dominate market sentiment, with limited signs of de-escalation raising the risk of a prolonged conflict. In the latest developments, the Wall Street Journal (WSJ) reported on Friday, citing US officials, that the Pentagon is deploying three warships and thousands of additional Marines to the region.

The report comes even as President Donald Trump indicated earlier that the US would avoid deploying ground troops in Iran.

This is keeping Oil and broader energy prices elevated. Since Oil is denominated in USD, rising energy prices typically increase demand for the Greenback. At the same time, the USD remains the preferred safe-haven currency in periods of market stress, as traders seek liquidity and stability, further underpinning its strength.

Markets also digested this week’s monetary policy decisions from the Federal Reserve (Fed) and the Swiss National Bank (SNB). Both central banks left interest rates unchanged, with the Fed holding its benchmark rate in the 3.50%-3.75% range and the SNB maintaining its policy rate at 0.00%, in line with market expectations. Policymakers also highlighted rising risks to the economic outlook stemming from the ongoing US-Israel war with Iran.

Looking ahead, the outlook differs for the two economies. In the US, higher Oil prices may push inflation higher, making it harder for the Fed to cut rates and supporting expectations that rates could stay elevated for longer. In Switzerland, inflation is already low, and a strong Swiss Franc helps limit imported price pressure, reducing the need for tighter policy.