• The US Dollar weakens against the Swiss Franc amid uncertainty linked to the US budget impasse.
• A congressional vote on federal funding remains a key driver of market sentiment.
• Stronger-than-expected US manufacturing data help limit the downside in the US Dollar.

USD/CHF trades lower around 0.7780 on Tuesday, down 0.15% on the day at the time of writing. The pair remains under pressure as political uncertainty in the United States (US) weighs on the US Dollar (USD), despite the release of encouraging economic indicators.

The Greenback loses ground against the Swiss Franc (CHF), a traditional safe-haven currency, amid a partial shutdown of the US government. The lack of a budget agreement has delayed the release of key economic data, including the employment report, adding to concerns over economic and institutional visibility in the United States. The House of Representatives is expected to vote on a funding bill on Tuesday, which could end the shutdown if approved and signed by US President Donald Trump. However, an extended shutdown could continue to undermine investor confidence in US governance.

Geopolitical risks also remain in focus. Potential diplomatic talks between the United States and Iran, reportedly scheduled for later this week, are keeping markets cautious. Any deterioration in the geopolitical backdrop would likely boost demand for safe-haven assets, such as the Swiss Franc, creating additional headwinds for USD/CHF.

At the same time, recent strength in US macroeconomic data helps cap the US Dollar’s losses. The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) showed a sharp improvement in January, pointing to a return to expansion in factory activity. This positive surprise prompted investors to scale back expectations of near-term monetary easing by the Federal Reserve (Fed), with the first rate cut now more widely seen in the summer.

Additional support for the US Dollar also comes from developments on the trade front. Markets are factoring in the potential impact of recently announced trade agreements by the US administration, which could improve medium-term growth prospects.

Looking ahead, investors will focus on speeches by Fed officials, which may provide further clues on the outlook for monetary policy, especially as the temporary absence of some official data increases the importance of qualitative signals.