USD/CHF hangs around 0.8530, risk-aversion emerges after Houthi’s attack USS Laboon

• USD/CHF treads water to continue its winning streak as the US Dollar improves.
• The escalated concern in the Red Sea could have supported the safe-haven CHF.
• The 28,000 leaders are expected to participate in the 54th World Economic Forum Annual Meeting in Davos.

The USD/CHF pair moves sideways in the presence of heightened geopolitical conflict in the Middle East, hovering around 0.8530 during the European session on Monday. The Iran-backed Houthi militia launched an anti-ship missile at the USS Laboon in the Red Sea on Monday, which was intercepted by a US fighter jet, resulting in no harm to the navy vessel or the aircraft. This situation follows the military attacks on Iran-led Houthi targets carried out by the United States (US) and the United Kingdom (UK) on Friday. These events are perceived to have bolstered the demand for the safe-haven currency Swiss Franc (CHF).

US Dollar Index (DXY) trims intraday losses, improving toward 102.50 at the time of writing. The Greenback faced challenges after the release of the downbeat Producer Price Index (PPI) data on Friday as it reinforces the market speculation of Federal Reserve’s rate cuts as early as March by 25 basis points. The US Producer Price Index (PPI) figure was reported at 1.0% year-on-year in December, surpassing the previous reading of 0.8%. However, the Core PPI year-on-year arrived at 1.8%, down from 2.0% in November. The monthly headline and Core PPI indices remained at a 0.1% decline and 0.0%, respectively.

On the Swiss side, the Swiss Franc (CHF) gained support and recorded profits last week, driven by positive economic data. The Consumer Price Index (YoY) for December showed continued growth, and there was an improvement in Real Retail Sales. These positive economic indicators contributed to the overall strength of the Swiss Franc.

Additionally, the upcoming five-day World Economic Forum in Davos is anticipated to have an impact. More than 28,000 leaders from around the world are expected to participate in the 54th World Economic Forum Annual Meeting, starting on Monday. The event could provide insights and discussions on various economic and geopolitical issues.