The US dollar (USD) continues its upward trend against the Swiss franc (CHF), currently holding above 0.7800 after bouncing back from around 0.7760 last week. On Wednesday, there was a noticeable increase in the dollar’s value across various markets, largely due to a cautious outlook prompted by tensions in the Middle East and dwindling expectations for further interest rate cuts by the U.S. Federal Reserve (Fed).
Tuesday’s release of the U.S. consumer price index (CPI) data highlighted inflationary pressures linked to the situation in Iran, suggesting that any additional Fed rate cuts in the near future may be off the table.
The CPI for April came in at 3.8% year-on-year, exceeding the 3.7% forecast and marking its highest point since May 2023. Additionally, the core CPI, which removes food and energy costs, increased to 2.8%, surpassing the expected 2.7% and significantly higher than the Fed’s target of 2%. This has led futures markets to adjust their expectations toward a tighter monetary policy, resulting in a rise in Treasury yields and boosting demand for the dollar.
As the day progressed, the April producer price index was anticipated to follow a similar trend, but the spotlight was really on US President Donald Trump’s upcoming meeting with Chinese President Xi Jinping. During this meeting, Trump is expected to address various topics including U.S.-China trade, rare earth minerals, Taiwan’s status, and seek China’s assistance in improving relations with Iran.
At the same time, the situation in the Middle East remains mostly unchanged. Although the US president has issued new threats against Tehran, any significant developments are likely contingent upon the outcome of the Trump-Xi meeting. With the Strait of Hormuz still effectively blocked and no immediate plans for its reopening, oil prices have hovered near $100, which keeps investors cautious.
