The USD/CHF pair lost momentum to around 1.3690, ending three consecutive days of gains during Asian trading hours on Friday (6/20). Concerns about the US involvement in the Middle East conflict fueled demand for the Swiss Franc (CHF), a safe-haven currency. The US Philly Fed Manufacturing Index will be published later on Friday.
The conflict between Israel and Iran has entered its seventh day. The White House said that US President Donald Trump will make a decision in the next two weeks on whether to join Israel in the war. Uncertainty about the war raging in the Middle East and fears that direct US involvement will expand the conflict increased safe-haven flows, supporting the Swiss Franc and creating a drag on the pair.
On Thursday, the Swiss National Bank (SNB) decided to cut interest rates by 25 basis points from 0.25% to zero at its June meeting and did not rule out returning borrowing costs to negative territory in the future. The CHF strengthened against the US dollar after the rate decision.
"Unless the situation changes drastically between now and September... today's decision paves the way for a further rate cut in September and a return to negative rates," said Charlotte de Montpellier, economist at ING Bank.
On the other hand, the hawkish tone from the US Federal Reserve (Fed) could support the greenback. The US central bank kept its key lending rate unchanged on Wednesday and maintained its projection for two quarter-point rate cuts this year. Fed Chairman Jerome Powell sounded a cautious note about further easing ahead, saying he expects "meaningful" inflation ahead as a result of Trump's aggressive trade tariffs. (alg)
Source: FXstreet
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