The US Dollar (USD) reversed its four-day positive streak on Monday, trading near the 99.80 price region after previously hitting the 100 mark last week, as markets assessed the United States strike on Kharg Island, a strategic Iranian oil outpost in the Persian Gulf. President Trump warned that further disruptions by Tehran in the Strait of Hormuz could lead to US targeting Iranian oil infrastructure, and urged allies to help secure the shipping lane, though no countries have responded yet [1]. The USD was strongest against the Canadian Dollar, but lost ground against most other major currencies, including the Euro, British Pound, Japanese Yen, and Swiss Franc, as shown in the heat map of percentage changes [1].
The Swiss Franc (CHF) gained traction against the US Dollar, with USD/CHF trading around 0.7869, easing after reaching its highest level since January 22 on Friday. The CHF has strengthened against most major peers since the US-Iran conflict erupted, reflecting its safe-haven appeal during geopolitical uncertainty. Despite this, the US Dollar has remained relatively resilient due to its role as the world’s primary reserve currency, with investors seeking liquidity during market stress [2]. Rising oil prices, with West Texas Intermediate (WTI) trading around $93.80 per barrel, have provided additional support to the USD, as global crude trade is priced in US Dollars [1][2].
Market attention is now focused on upcoming interest-rate decisions from the Federal Reserve (Fed), European Central Bank (ECB), and Swiss National Bank (SNB). Both the Fed and ECB are widely expected to keep rates unchanged this week, with the Fed maintaining the 3.50%-3.75% target range and the SNB holding at 0% [1][2]. A Reuters poll indicated that all but one of 29 economists expect the SNB to keep rates at 0% through 2026, and policymakers are likely to rely on foreign-exchange intervention rather than negative rates to counter excessive CHF strength [2].
Traders have sharply trimmed expectations for Fed rate cuts, now pricing in around one cut by year-end compared to at least two previously, as inflation remains above the Fed’s 2% target and higher energy costs add upside risks. Investors are closely watching Fed Chair Jerome Powell’s forward guidance for clues on how policymakers will balance inflation risks against labor market downside risks [2].
EUR/USD is trading near 1.1500, breaking a four-day losing streak as the Euro recovers ahead of the ECB and Fed decisions. GBP/USD is near 1.3330, trimming losses ahead of the Bank of England's rate decision, which is also expected to hold rates steady. USD/JPY is trading near 159.00 ahead of Fed and Bank of Japan policy decisions [1].
CONCLUSION
The US Dollar has pulled back amid heightened geopolitical tensions and anticipation of central bank decisions, while the Swiss Franc has strengthened as a safe-haven asset. Market participants are now focused on upcoming policy announcements from the Fed, ECB, and SNB, with expectations for unchanged rates and cautious forward guidance. Elevated oil prices and trimmed Fed rate cut expectations suggest continued volatility and inflation concerns in the near term.