USD/CHF drifts lower to around 0.8160 in Wednesday’s early European session.
Rising geopolitical risks support the Swiss Franc and create a tailwind for the pair.
The Fed interest rate decision will be closely watched later on Wednesday.
The USD/CHF pair weakens to near 0.8160, snapping the three-day winning streak during the early European trading hours on Wednesday. The persistent geopolitical tensions in the Middle East lift the safe-haven currency like the Swiss Franc (CHF). Later on Wednesday, all eyes will be on the US Federal Reserve (Fed) interest rate decision.
Israel is set to intensify its attacks on Tehran, while the United States (US) is considering expanding its role amid rising tensions between Israel and Iran. Late Tuesday, US President Donald Trump posted on his social media platform, calling for Iran’s “unconditional surrender.” Investors are concerned that the United States will participate in the Israel-Iran conflict, which boost the safe-haven flows, benefitting the CHF.
The Fed interest rate decision will take center stage later on Wednesday, which is expected to hold policy rates unchanged in the range of 4.25%-4.50% at its June meeting. Traders will keep an eye on the press conference as it might offer some hints about the interest rate path this year.
Any dovish remarks from the Fed officials could contribute to the USD’s downside. Based on the latest US inflation data, traders now see a nearly 80% possibility of a Fed rate cut in September, followed by another one in October, according to Reuters.
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