The U.S. Dollar extended its modest rebound against the Swiss Franc on Tuesday, with USD/CHF edging higher to around 0.8015 in early European trading. The move comes ahead of key data releases, with investors awaiting Swiss Real Retail Sales and the U.S. ISM Manufacturing PMI for August later in the day.
Fed rate cut expectations cap upside momentum
While the greenback’s recovery has supported the pair, gains remain capped by strong market conviction that the Federal Reserve will begin cutting rates in September. Fed Chair Jerome Powell recently signaled that risks to the labor market are rising, leaving the door open for policy easing.
Fed Governor Christopher Waller reinforced the dovish outlook, stating that he would back a September rate reduction, with scope for additional cuts over the next three to six months to prevent further labor market deterioration. According to the CME FedWatch tool, traders are currently pricing in a 90% probability of a 25-basis-point cut on September 17.
Swiss Franc supported by safe-haven demand
On the Swiss side, geopolitical tensions continue to lend the franc underlying support. Escalating conflict in Eastern Europe has reinforced safe-haven demand after Russian drone strikes targeted power facilities in northern and southern Ukraine over the weekend, leaving nearly 60,000 households without electricity. In response, Ukrainian President Volodymyr Zelenskyy pledged retaliatory strikes deep inside Russia, raising the risk of further escalation.
Outlook
With U.S. data releases looming, USD/CHF may remain range-bound in the near term. Stronger-than-expected ISM manufacturing numbers could provide the Dollar with fresh support, while weaker readings would likely reinforce expectations for Fed easing, dragging the pair lower. On the Swiss side, safe-haven flows tied to geopolitical tensions may continue to act as a counterweight to Dollar strength.
