Swiss Franc gains slightly against US Dollar as Oil prices ease
- USD/CHF trades flat as easing Oil prices weigh modestly on the US Dollar and Treasury yields.
- Strong US business activity and rising Fed rate-hike bets limit the Greenback’s downside.
- Traders await next week’s FOMC meeting, with interest rates expected to remain unchanged.
USD/CHF trades flat on Friday as a pullback in Oil prices weighs modestly on the US Dollar (USD) and US Treasury yields. However, the Middle East war and hawkish Federal Reserve (Fed) expectations keep an underlying floor under the Greenback.
At the time of writing, the pair trades around 0.8166, easing from 0.8185, its highest level since June 2025. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.35, down 0.10% on the day.
US President Donald Trump said on Truth Social that Chinese President Xi Jinping and Russian President Vladimir Putin had assured him that their countries would not supply weapons to Iran.
Meanwhile, Iranian Foreign Minister Abbas Araghchi said Tehran had discussed several initiatives and proposals with Pakistan as a mediator. He added that the main obstacle was not the lack of a mediator but Washington’s “problematic approach,” according to Tasnim.
Oil prices edge lower on Friday but remain around 25% higher this month as the Middle East war threatens shipping through the Strait of Hormuz and Bab el-Mandeb. West Texas Intermediate (WTI) trades around $87.50 after briefly climbing above $92.00 on Thursday, its highest level since June 11.
According to the CME FedWatch Tool, traders see an 80% chance of a rate hike in September, although the Fed is widely expected to keep borrowing costs unchanged at its July 28-29 meeting.
TD Securities analyst note, “higher oil prices driven by Middle East tensions have increased inflation risks and strengthened the case for a rate hike,” but argues that “more evidence is needed to win majority support.” TD adds that “hawkish momentum is building,” yet cautions that Warsh is “unlikely to provide guidance,” and they look for “two dissents from Hammack and Logan” as the committee debates how to respond to the latest inflation impulse.
On the data front, the preliminary S&P Global Composite Purchasing Managers’ Index (PMI) rose to an eight-month high of 53.6 in July from 51.9 in June, while the Services PMI climbed to 53.6 from 51.2. The Manufacturing PMI edged down to 53.8 from 53.9.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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