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• USD/CHF declines to around 0.9030 in Tuesday’s early European session. 
• The likelihood that the Fed will make fewer rate cuts next year might support the USD. 
• Escalating geopolitical tension in the Middle East could boost the safe-haven flows, benefiting the CHF. 

The USD/CHF pair softens to near 0.9030, snapping the two-day winning streak during the early European session on Tuesday. The cautious mood and geopolitical risks could boost the safe-haven currency like the Swiss Franc (CHF). Trading conditions remain choppy ahead of the New Year holiday. 

The expectation of a slower pace of Federal Reserve (Fed) rate cuts and rising US Treasury Yields might keep the Greenback on the front foot. Fed officials see the interest-rate forecast for 2025 to 50 basis points (bps) of cuts, down from 100 bps. Fed Chair Jerome Powell noted that the US will look for further progress on inflation in 2025 as elevated inflation in the year-over-year data is concerning policymakers.

On the Swiss front, traders will closely monitor the development surrounding escalating geopolitical tensions in the Middle East. Ant signs of geopolitical risks could boost the safe-haven currency like the Swiss Franc (CHF) and act as a headwind for USD/CHF. On Monday, Israeli forces killed four Palestinians in an attack on besieged Jabalia in North Gaza after a day of attacks that killed at least 27 people across the Strip.

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