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• USD/CHF loses ground near 0.8620 in Tuesday’s early Asian session.
• The expectation of three quarter-point rate cuts this year weighs on the USD. 
• Easing geopolitical risks in the Middle East could cap the pair’s downside. 

The USD/CHF pair trades in negative territory for the third consecutive day around 0.8620 on Tuesday during the early European trading hours. The weaker US Dollar (USD) amid rate-cut expectation by the Federal Reserve (Fed) weighs on the pair. The Fed Chair Jerome Powell's speech on Friday will be a closely watched event and might offer some hints about the path forward for US interest rates. 

The Fed is predicted to deliver 25 basis points (bps) at each of the remaining three meetings of 2024, according to a slim majority of economists polled by Reuters. A discouraging July US employment report fuelled traders to place more bets on deep rate cuts, which exerts some selling pressure on the USD. 

The USD Index (DXY), which measures the value of the USD against the other six major currencies, drops to the multi-day lows below the 102.00 support level. On Monday, Minneapolis Fed President Neel Kashkari said that he would be open to cutting US interest rates in September due to the rising possibility that the labor market weakens too much. The dovish stance from the US Fed is likely to cap the upside of the pair in the near term. 

On the other hand, easing geopolitical risks in the Middle East could drag the Swiss Franc (CHF) lower and create a tailwind for the pair. The United States said that Israeli Prime Minister Benjamin Netanyahu has accepted a bridging proposal aimed at resolving differences between Israel and Hamas. A de-escalation of tensions in the Middle East would most likely result in the geopolitical risk premium disappearing rapidly.

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