USD/CHF remains stronger near 0.7800 on fading Fed rate cut odds

USD/CHF pares its recent losses from the previous session, trading around 0.7800 during the Asian hours on Thursday. The pair appreciates as the US Dollar (USD) gains ground, as the Iran conflict has entered its sixth day.

Iranian retaliatory strikes on energy infrastructure have disrupted critical Middle East Oil and gas flows, particularly through the Strait of Hormuz, driving energy prices higher and reviving inflation concerns. In turn, traders have scaled back expectations for Federal Reserve (Fed) rate cuts, lending support to the US Dollar.

Meanwhile, US and Israeli strikes across Iranian territory, alongside extensive Iranian missile and drone retaliation targeting regional sites and military facilities, have prolonged the conflict and amplified its broader impact.

Hostilities intensified further after a US submarine reportedly sank an Iranian warship off the coast of Sri Lanka. US Defense Secretary Pete Hegseth described it as the “first such attack on an enemy since World War II.”

However, the upside of the USD/CHF pair could be restrained as the Swiss Franc (CHF) strengthens on safe-haven demand amid heightened geopolitical tensions. Meanwhile, Swiss National Bank (SNB) Vice-President Antoine Martin reiterated the central bank’s readiness to intervene to prevent excessive CHF appreciation.

Swiss inflation held steady at 0.1% in February for a third straight month, defying expectations of a 0.1% decline. With price growth near the lower edge of the SNB’s 0–2% target range, policymakers remain cautious over lingering deflation risks.