The USD/CHF pair strengthened to around 0.8935, snapping a two-day losing streak during the early European session on Monday (12/23). A hawkish interest rate cut by the US Federal Reserve (Fed) provided some support to the greenback. Traders await the December US Consumer Confidence report and the Chicago Fed National Activity Index, due on Monday.

The Fed cut interest rates by a quarter-point last week and has forecast only two rate cuts in 2025, down from its initial estimate of four. Hawkish signals from the US central bank, which has recently appeared concerned about persistent inflation in the coming months, could lift the greenback against the Swiss franc (CHF).

On the other hand, the Swiss National Bank (SNB) cut its benchmark interest rate by 50 basis points (bps) at its December meeting, beating expectations for a smaller cut amid weaker-than-expected inflation in Switzerland and rising uncertainty about the global economy. A more aggressive rate cut from the SNB than the Fed could weaken the CHF and act as a boost for USD/CHF.

SNB Chairman Martin Schlegel left open the possibility of further rate cuts next year but said it was now unlikely the Swiss central bank could cut rates below 0%. "We will continue to monitor the situation closely and will adjust our monetary policy if necessary to ensure that inflation remains within a range consistent with price stability over the medium term," Schlegel added.

Meanwhile, rising geopolitical tensions in the Middle East could boost safe-haven currencies such as the CHF. Israeli strikes on the Gaza Strip overnight and early Sunday killed at least 50 Palestinians, including at a single-family home and at a school, according to Palestinian medical officials. The Houthi group issued a statement claiming responsibility for the attacks, saying they had aimed hypersonic ballistic missiles at military targets.

Source: FXStreet