The USD/CHF pair surged to its highest level since early August, reaching around 0.8755 during the Asian session on Wednesday, before retreating slightly to trade just above 0.8700. Despite this pullback, the pair remained up 0.90% for the day, reflecting strong demand for the US Dollar (USD).
The USD’s strength was driven by initial exit polls from the US presidential election, which showed a lead for former President Donald Trump in key swing states. This sparked a wave of optimism among traders, contributing to a broader risk-on sentiment in global equity markets. As a result, the Swiss Franc, a traditional safe-haven currency, weakened, providing further support to the USD/CHF pair.
Trump Optimism Fuels USD Rally
The expectation of a Republican sweep in the upcoming election has raised speculation that Trump could reintroduce inflation-generating tariffs and pursue deficit-spending policies. These concerns, combined with the possibility of a less aggressive Federal Reserve (Fed) easing cycle, have pushed US bond yields higher. The yield on the benchmark 10-year US government bond surged over 15 basis points to 4.44%, its highest level since July 2, further bolstering the USD.
Volatility Concerns Cap Further Gains for USD/CHF
While the fundamental outlook remains supportive for the USD, expectations for increased volatility in financial markets could limit the potential for further USD/CHF gains. Traders are cautious, and any decline in the pair may be seen as a buying opportunity, with downside risks likely to remain limited in the current market environment.
The USD/CHF’s path of least resistance appears to remain to the upside, with further gains likely if the USD maintains its bullish momentum.
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