The USD/CHF pair edges lower after posting gains over the previous two sessions, trading around the 0.7880 area during Asian hours on Tuesday. The pullback reflects renewed demand for the Swiss Franc, with investors gravitating toward traditional safe-haven assets amid escalating geopolitical uncertainty.
Later in the session, market participants will turn their attention to the Swiss KOF Leading Indicator, which is closely watched for signals on the future trajectory of Switzerland’s overall economic activity.
Safe-haven demand for the CHF has intensified against the backdrop of rising global tensions. Russia’s foreign minister said Moscow’s negotiating stance could change following alleged strikes on President Vladimir Putin’s residence, adding a fresh layer of uncertainty to the Ukraine-Russia conflict.
Geopolitical risks have also increased in the Middle East. Saudi air strikes in Yemen and Iran’s declaration of a “full-scale war” with the United States, Europe, and Israel have heightened fears of broader regional instability. US President Donald Trump has warned of further military action should Iran resume rebuilding its nuclear program, reinforcing risk-off sentiment across markets.
On the other side of the pair, the US Dollar remains under pressure as expectations persist that the Federal Reserve will deliver two additional interest rate cuts in 2026. According to the CME FedWatch tool, markets are pricing in an 83.9% probability that rates will remain unchanged at the Fed’s January meeting, up from 80.1% a week earlier. At the same time, the likelihood of a 25-basis-point cut has declined to 16.1% from 19.9%.
Traders remain cautious ahead of the release of the Federal Open Market Committee (FOMC) Minutes from the December meeting later on Tuesday, which could provide further clarity on the Fed’s policy outlook for 2026. Attention will then shift to US Initial Jobless Claims data due on Wednesday for additional cues on the health of the US labor market.
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