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- USD/CHF gains traction around 0.7865 in Tuesday’s early European session.
- Fed interest rate decision will take center stage on Wednesday, with no change in rate expected.
- SNB’s Schlegel reaffirmed that the central bank is open to policy adjustments and FX interventions to curb excessive Swiss Franc strength.
The USD/CHF pair gathers strength near 0.7865 during the early European session on Tuesday. The US Dollar (USD) edges higher against the Swiss Franc (CHF) due to the stalled US-Iran ceasefire and the closure of the Strait of Hormuz. Traders brace for the US Federal Reserve (Fed) interest rate decision later on Wednesday.
Plans for a second round of peace talks between the US and Iran stalled again after US President Donald Trump had cancelled plans to send a team to Pakistan for negotiations with their Iranian counterparts.
On Monday, Iran offered to end its closure of the Strait of Hormuz if the US lifts its blockade on the country and ends the war in a proposal that would postpone discussions on the Islamic Republic’s nuclear program. White House press secretary Karoline Leavitt said that it remains unclear if Trump will entertain the offer to end the two-month-old war, as his bottom-line demands remain the same.
The US central bank is likely to keep the federal funds rate between 3.50% and 3.75% on Wednesday. This may be Jerome Powell’s final meeting as Fed Chair before his term expires on May 15.
The Swiss National Bank (SNB) kept the policy rate at 0%. It aims to maintain this level to make the CHF less attractive to foreign investors. SNB Chairman Martin Schlegel reaffirmed at the April meeting that the bank is highly willing to intervene in foreign exchange (FX) markets by buying foreign currencies to weaken the CHF and protect price stability. He added that the current policy remains expansionary to support economic activity amidst “profound uncertainty.”
