USD/CHF rebounds from a five month low, edges higher near 0.8620

• USD/CHF attempts to halt a losing streak as the US Dollar improves.
• Fed officials pushed back on the speculation of a rate cut in March.
• The escalated tension in the Red Sea provided support for the safe-haven Swiss Franc.

USD/CHF recovers from the five-month low at 0.8593 level as US Dollar (USD) attempts to retrace its recent losses. The USD/CHF trades higher near 0.8620 during the European session on Wednesday. However, the US Dollar (USD) is feeling the heat following hints from the Federal Reserve (Fed) in last Wednesday's meeting that there probably won't be any further tightening. Adding to the downward pressure, the revised dot plots revealed Fed officials forecasting a potential 75 basis points of easing in 2024.

However, Fed officials are all singing from the same hymn sheet. New York Fed President John Williams opposed the speculation surrounding a potential rate cut in March. San Francisco Fed President Mary Daly called the predictions on policy stance premature. Austan Goolsbee, Chicago Fed President echoed a similar sentiment, cautioning that the market's optimism for interest rate cuts may have gone beyond realistic expectations.

The situation between Israel and Hamas appears to have intensified, with the Iran-led Houthi militant group carrying out attacks on commercial ships near Libya. The risk aversion in trade and supply, driven by the escalated tensions in the region, has indeed led investors to consider the safe-haven Swiss Franc (CHF). However, in response to the attacks on commercial vessels in the Red Sea, the United States (US) has taken proactive measures by establishing a task force. This task force is dedicated to safeguarding Red Sea commerce.

The Swiss Franc (CHF) encountered a hurdle as the Swiss National Bank (SNB) chose to maintain unchanged interest rates during last week. SNB Chairman Thomas Jordan acknowledged a slight dip in inflationary pressures, highlighting the ongoing high level of uncertainty. Investors are poised to closely observe the central bank’s Quarterly Bulletin for Q4 on Wednesday for additional insights into the Swiss economic landscape.