USD/CHF looks to build momentum beyond 0.8200 ahead of SNB rate decision

• USD/CHF attracts buyers for the fifth straight day amid a broadly firmer USD.
• The Fed’s hawkish pause on Wednesday lifted the USD to over a one-week top.
• Bets for more aggressive rate cuts by the SNB continue to weigh on the CHF.

The USD/CHF pair builds on its recent recovery from the vicinity of mid-0.8000s, or a nearly two-month low touched last week, and scales higher for the fifth straight day on Thursday. The momentum lifts spot prices to over a one-week high during the Asian session, with bulls awaiting a sustained move beyond the 0.8200 mark ahead of the key central bank event risk.

The Swiss National Bank (SNB) will announce its policy decision later today and is widely expected to lower interest rates by 25 basis points (bps) to zero. Moreover, investors seem convinced that the central bank would not shy away from bringing negative interest rates this year amid heightened uncertainty around the erratic US tariff policy. This is seen as a key factor behind the Swiss Franc's (CHF) relative underperformance and acts as a tailwind for the USD/CHF pair amid some follow-through US Dollar (USD) buying.

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, advances to its highest level in over a week in the wake of the Federal Reserve's (Fed) hawkish pause on Wednesday. In the so-called dot plot, the committee projected two rate cuts by the end of 2025, though policymakers see only one 25-basis points rate cut in each of 2026 and 2027. This, in turn, offers additional support to the USD/CHF pair. However, rising geopolitical tensions could limit deeper losses for the safe-haven CHF.

As the Israel-Iran conflict enters its seventh day, reports suggest that US officials are preparing for a possible Iran strike this coming weekend. The Israel Defense Forces (IDF) warned residents of the cities of Arak and Khondab in central Iran to evacuate for their safety as it is operating in the area against Iranian military infrastructure. This raises the risk of an all-out war in the Middle East, which, along with persistent trade-related uncertainties, continues to weigh on investors' sentiment and triggers the global flight to safety.