The US Dollar (USD) experienced broad weakness at the start of the week, driven by renewed optimism over a potential US-Iran agreement that has reduced safe-haven demand for the Greenback. According to an Axios report cited in Source 1, the US and Iran are close to signing a deal involving a 60-day ceasefire extension, reopening the Strait of Hormuz, and the removal of mines by Iran in exchange for the US lifting its blockade on Iranian ports. This development has eased market concerns about inflation and the trajectory of Federal Reserve (Fed) interest rate hikes, contributing to the USD's decline [1][2].
The USD/CHF pair extended its losing streak for the fourth consecutive day, trading around 0.7820 during Asian hours on Monday, as the Swiss Franc advanced against the weakening USD [1]. The US Dollar was down 0.35% against the Swiss Franc and 0.32% against the Euro, according to the latest percentage change data [2]. The EUR/USD pair opened with a bullish gap, climbing back toward the mid-1.1600s, after touching a low of 1.1575 last Thursday. Technical indicators for EUR/USD, such as an RSI around 58 and a slightly positive MACD, suggest improving momentum, with immediate resistance at the 1.1675-1.1680 region and support at 1.1638 [2].
Despite the current USD weakness, market participants remain cautious due to persistent inflationary pressures in the US. The CME FedWatch tool shows a 45.1% probability that the Fed will raise interest rates by 25 basis points by year-end [1]. Additionally, Federal Reserve Governor Christopher Waller indicated that the central bank should no longer retain an easing bias in its policy statement, adding complexity to the outlook for US monetary policy [1].
On the Swiss side, Swiss National Bank (SNB) Vice Chairman Martin Schlegel stated last week that the SNB maintains a high willingness to intervene in foreign exchange markets if necessary, and that Swiss inflation remains within the central bank's price stability range [1]. Market participants are closely watching for any signals regarding a potential shift away from the SNB's dovish stance, especially as global inflationary pressures persist [1].
CONCLUSION
The US Dollar's decline, driven by optimism over a potential US-Iran deal, has strengthened both the Swiss Franc and the Euro. However, ongoing inflation concerns and shifting expectations for Federal Reserve policy are tempering further USD losses. Market participants are closely monitoring central bank signals and geopolitical developments for future direction.