The Swiss Franc trades practically flat against the US Dollar (USD) on Tuesday, consolidating halfway through last week’s trading range.
The USD/CHF pair bounced up from Friday’s lows just above 0.8050 on Monday, amid growing concerns about the fate of the US-Iran peace negotiations and hawkish comments from Federal Reserve (Fed) officials, with FX volatility subdued ahead of the US Consumer Price Index (CPI) release, due on Wednesday
In the absence of key macroeconomic releases on Tuesday, developments in the Middle East are driving markets with growing uncertainty about the peace plan pushing Oil prices higher and curbing investors’ appetite for risk. US and Iran fail to find a formula to reopen the Strait of Hormuz, entangled in reciprocal requests for war damage compensation, and drifting away expectations of a swift resolution of the conflict. Beyond that, Cleveland Federal Reserve (Fed) President Beth Hammack affirmed on Monday that the central bank might have to hike interest rates more than once to bring inflation to target.
This has fuelled hopes of some monetary tightening in September, offsetting the negative impact from Friday’s US Nonfarm Payrolls, and providing some support to the US Dollar. OCBC: USD seen rangebound as Fed hike bar stays high Regarding US consumer inflation, strategists at OCBC argue that Wednesday’s report would need to deliver a clear upside surprise to meaningfully shift the policy narrative. In their view, “core CPI would need to print at 0.3% MoM or higher in July, above the 0.2% consensus forecast, to materially lift expectations of a September rate hike.” Against this backdrop, they expect that “a rangebound USD, combined with a constructive risk backdrop, should continue to support carry trades despite ongoing volatility in oil markets.” Nevertheless, they warn that “Iran’s firm conditions for Washington suggest any near-term boost to energy supply is likely to be limited.” The Swissie, however, is unlikely to perform any…