The USD/CHF pair saw its third consecutive day of gains, reaching around 0.7840 during Asian trading on Tuesday. Meanwhile, the Swiss Federal Statistical Office is set to release the consumer price index (CPI) data for April today.
On Monday, Switzerland’s SVME Manufacturing Purchasing Managers’ Index (PMI) climbed to 54.5 for April, rising from 53.3 and exceeding expectations of 52.0. This marks a second straight month of economic growth and the highest level recorded since October 2022. Despite ongoing tensions in the Middle East, sentiment regarding Swiss manufacturing has taken a positive turn.
The USD/CHF increase can be attributed to a stronger US dollar (USD), which gained traction amid rising risk aversion following an attack by Iran on the United Arab Emirates (UAE). Reports indicated that Iranian drones and missiles targeted the UAE, while the U.S. stated it had destroyed an Iranian vessel in the Strait of Hormuz. President Trump has warned that any attack by Iran on U.S. vessels ensuring safe passage through the strait could lead to severe consequences for Iran.
Iran’s Foreign Minister Abbas Araghchi commented that the current situation in the Strait of Hormuz shows there is “no military solution to the political crisis.” He mentioned on X that ongoing negotiations, aided by Pakistan, should keep the U.S. cautious of being drawn back into conflict, applying the same caution to the UAE. He described “Project Freedom” as a “project deadlock.”
U.S. Treasury yields have risen on the expectation that the Federal Reserve may need to increase interest rates to tackle inflation, contributing to a stronger dollar. Minneapolis Fed President Kashkari stated that further rate hikes could be a possibility, particularly as inflationary pressures continue due to rising energy costs stemming from the situation with Iran.
