The USD/CHF pair rebounded to around 0.9070, ending a two-day losing streak during early European trading hours on Wednesday (1/22). The pair's gains were supported by a generally stronger US Dollar (USD) after US President Donald Trump said on Tuesday that he would impose tariffs and duties on trading partners.

On Tuesday evening, Trump said that his team was discussing 25% tariffs on Canada and Mexico, as well as duties on China and the European Union. Trump added that the measures could come into effect as early as February 1. "We're talking about a 10% tariff on China based on the fact that they're sending fentanyl to Mexico and Canada," Trump said. Analysts expect the Trump administration to stoke inflationary pressures, potentially convincing the US Federal Reserve (Fed) to cut interest rates only once this year, which would support the USD.

Rising expectations that the Swiss National Bank (SNB) will continue to cut interest rates could weigh on the Swiss Franc (CHF) against the USD. The interest rate has been cut to 0.5% due to concerns over inflation remaining below the SNB's target.

On the other hand, ongoing geopolitical tensions between Russia and Ukraine could boost safe-haven inflows, benefiting the CHF. Ukraine launched a wave of drones into Russia, causing a fire at an oil storage facility and an explosion at a factory producing military aircraft, the Ukrainian army said on Tuesday. Investors will also be monitoring developments surrounding a ceasefire agreement and a hostage release deal between Israel and Hamas. (AL)

Source: FXstreet