The US dollar strengthened against the Swiss franc on Monday (August 18th), retracing Friday's decline. The greenback strengthened against most major currencies on Monday, with all eyes on today's Trump-Zelensky meeting, while Swiss industrial production data added to concerns about economic momentum.

Investors remained cautious about risk as media reports suggested that Trump would pressure his Ukrainian counterpart to accept Putin's terms for a peace deal. These demands, which largely involve ceding territory to Russia, have been flatly rejected by Zelensky on previous occasions and are unlikely to find support among the European leaders attending the summit.

Risk aversion amid geopolitical uncertainty supports the US dollar.

In this context, moderate risk aversion offsets market expectations for a Fed rate cut in September, which remains at 84%, despite strong Retail Sales data seen on Friday, and provides some support for the US dollar.

US dollar sellers may also trim their short positions ahead of a crucial conference to be attended by Fed Chairman Jerome Powell on Friday. There is a high risk that Powell will not sound sufficiently dovish, given current market expectations, a possibility that would further cloud the September rate cut scenario.

In Switzerland, recent data showed that industrial production contracted 0.1% in Q2 after growing 8.9% in the previous quarter. These figures suggest that the economy is likely to face a significant setback due to high export tariffs to the US, which could force the SNB to cut interest rates to negative levels. (alg)

Source: FXstreet