The US Dollar (USD) stabilized on Monday after last week's sell-off, with the USD/CHF currency pair edging higher by approximately 0.20% to trade around 0.8026. This stabilization follows the US Treasury's announcement to increase longer-dated bond buybacks, which had previously sparked concerns over the US fiscal outlook and rising government debt, pushing the US Dollar Index (DXY) to a three-month low of 98.56 before recovering to 99.05 on Monday [1].
A key development influencing markets is the US Treasury's launch of 'Operation Economic Outcast,' a new sanctions campaign aimed at tightening economic pressure on Iran. Treasury Secretary Scott Bessent announced the expansion of secondary sanctions targeting entities and countries transacting with Iran, with around 60 Iran-linked individuals, entities, and vessels sanctioned for connections to Iran's nuclear, missile, cyber, and oil networks [1]. In response, a senior Iranian official warned that these measures could escalate tensions, including threats to halt oil exports through the Strait of Hormuz and other Persian Gulf routes [1].
Geopolitical tensions are providing some support for the US Dollar, though gains appear limited. The market is also digesting softer US employment and inflation data for July, which have reduced expectations for a near-term Federal Reserve interest-rate hike, presenting another headwind for the USD [1]. Investors are now focused on the upcoming US Personal Consumption Expenditures (PCE) Price Index report on Wednesday, which could influence inflation expectations and solidify forecasts that the Fed will keep rates unchanged at its next meeting. Additionally, Fed Chair Kevin Warsh is scheduled to speak at Jackson Hole on Friday, an event that could provide further policy guidance [1].
On the Swiss side, the economic calendar is quiet this week. Swiss inflation remains subdued, with annual CPI at 0.4% in July, near the lower end of the Swiss National Bank's (SNB) 0%-2% price-stability range. SNB Governing Board member Petra Tschudin indicated last week that negative interest rates could be reintroduced if necessary to maintain inflation within the target range [1].
CONCLUSION
The US Dollar has found support amid renewed geopolitical tensions and the launch of new US sanctions on Iran, though upside is capped by concerns over US fiscal policy and softer economic data. Market participants are now awaiting key US inflation data and Fed commentary for further direction. The Swiss Franc remains under pressure, with subdued inflation and a quiet domestic calendar limiting its appeal.