USD/CHF hangs around 0.8530, risk-averse following Houthi attack on USS Laboon

• USD/CHF treads water to continue its winning streak as the US Dollar improves.

• The escalated concern in the Red Sea could have supported the safe-haven CHF.

• The 28,000 leaders are expected to participate in the 54th World Economic Forum Annual Meeting in Davos.

The USD/CHF pair moved sideways amid heightened geopolitical tensions in the Middle East, hovering around 0.8530 during the European session on Monday. Iran-backed Houthi militias launched an anti-ship missile at the USS Laboon in the Red Sea on Monday, which was intercepted by a US fighter jet, causing no damage to the navy ship or aircraft. The situation follows military strikes on Iran-led Houthi targets carried out by the United States (US) and the United Kingdom (UK) on Friday. These events are believed to have strengthened demand for the safe-haven currency Swiss franc (CHF).

The US Dollar Index (DXY) pared intraday losses, advancing towards 102.50 at the time of writing. The greenback faced challenges on Friday after the release of downbeat producer price index (PPI) data as it bolstered market expectations for a rate cut by the Federal Reserve in early March by 25 basis points. The US Producer Price Index (PPI) figure was reported at 1.0% year-on-year in December, beating the previous reading of 0.8%. However, core PPI reached 1.8% year-on-year, down from 2.0% in November. The monthly headline and core PPI indices remained at 0.1% decline and 0.0% respectively.

On the Swiss side, the Swiss Franc (CHF) gained support last week and recorded gains, driven by positive economic data. The Consumer Price Index (YoY) for December showed steady growth, and real retail sales improved. These positive economic indicators have contributed to the overall strength of the Swiss franc.

Additionally, the upcoming five-day World Economic Forum in Davos is anticipated to have an impact. More than 28,000 leaders from around the world are expected to participate in the 54th World Economic Forum Annual Meeting, starting on Monday. The event could provide insights and discussions on various economic and geopolitical issues.