The USD/CHF pair remains positive around 0.8875 during Tuesday’s early European session, with the US Dollar (USD) gaining momentum. The increase follows US President-elect Donald Trump’s announcement of new tariffs on imports from Mexico, Canada, and China, which has strengthened the Greenback. Additionally, expectations for fewer interest rate cuts by the Federal Reserve in 2024 and geopolitical tensions involving Russia and Ukraine are influencing market sentiment.
USD Strengthens on Tariff Announcements
The US Dollar is on the rise following President-elect Donald Trump’s pledge to impose a 25% tariff on all goods entering the United States from Mexico and Canada, along with an additional 10% tariff on Chinese products. This announcement has boosted demand for the USD, as traders anticipate the potential impact on global trade dynamics.
Federal Reserve Rate Expectations
Market expectations for US interest rates have shifted, with economists now forecasting only two rate cuts next year, down from an earlier expectation of four. The Federal Reserve is still anticipated to reduce its key rate at its December meeting, but the probability of a quarter-point rate cut has decreased to 55.9% from 69.5% a month ago, according to the CME FedWatch Tool. Less dovish remarks from Fed officials have provided some support for the Greenback, and traders are now awaiting the release of the Federal Open Market Committee (FOMC) Minutes for further clues on the central bank‘s future policy stance.
Geopolitical Tensions Support the Swiss Franc
On the other side of the pair, the Swiss Franc (CHF) benefits from its safe-haven status amid rising geopolitical risks. Tensions between Russia and Ukraine have intensified, with reports indicating that Russian forces are advancing at their fastest rate since the early months of the conflict. This escalation has driven investors toward the Swiss Franc, traditionally viewed as a protective asset during times of global uncertainty.
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