• USD/CHF slips as the Swiss Franc gains traction against a softer US Dollar.
• Elevated Oil prices and Middle East tensions continue to shape market sentiment.
• Focus shifts to SNB and Fed interest rate decisions as markets reassess the monetary policy outlook.

The Swiss Franc (CHF) gains traction against the US Dollar (USD) on Monday as the Greenback edges lower, allowing USD/CHF to pause a four-day winning streak. At the time of writing, USD/CHF trades around 0.7869, easing slightly after touching its highest level since January 23 on Friday.

The Swiss Franc has strengthened against most major peers since the US-Iran conflict erupted, reflecting its traditional safe-haven appeal during periods of geopolitical uncertainty. However, the US Dollar has remained relatively resilient due to its dominant role as the world’s primary reserve currency, with investors seeking liquidity during times of market stress.

At the same time, rising Oil prices are providing additional support to the Greenback, as global crude trade is largely priced in US Dollars, meaning higher energy costs can indirectly boost demand for the USD.

Attention now shifts to the upcoming interest-rate decisions from the Swiss National Bank (SNB) and the Federal Reserve (Fed) due later this week. Both central banks are widely expected to keep policy settings unchanged, with the SNB rate seen holding at 0%, while the Fed is expected to maintain the 3.50%-3.75% target range.

Elevated Oil prices triggered by the ongoing Middle East conflict are fueling global inflation concerns and prompting several major central banks to reassess their monetary policy outlook with a more cautious or hawkish tone.

However, the situation is somewhat different for Switzerland. Despite being a major net importer of energy, a stronger Swiss Franc helps offset imported inflation by making foreign goods and commodities cheaper in local currency terms.

A Reuters poll published earlier on Monday showed that all but one of 29 economists expect the SNB to keep interest rates at 0% through 2026. The survey also suggested that policymakers are likely to rely on foreign-exchange intervention rather than a return to negative interest rates to counter excessive Swiss Franc strength.

Meanwhile, traders have also sharply trimmed expectations for Fed interest rate cuts, with markets now pricing in around one cut by year-end, compared with at least two cuts expected earlier. Inflation remains above the Fed’s 2% target, and renewed price pressure linked to higher energy costs has added upside risks to the outlook.

Investors will therefore closely watch forward guidance from Fed Chair Jerome Powell for clues on how policymakers plan to balance persistent inflation risks against downside risks in the labor market.