CHF Holds Losses as USD Gains Ground Amid Hawkish Fed Sentiment

The Swiss Franc (CHF) has seen its losses hold despite weaker-than-expected Real Retail Sales data. The data, released in June, came in at 1.5% year-over-year (YoY), falling short of the expected 3.1%. This weak performance weighed on the CHF, causing it to remain subdued.

The US Dollar (USD) gained ground as traders adopted caution due to hawkish sentiment surrounding the Federal Reserve's policy outlook. The USD/CHF pair appreciated as the Swiss Franc struggled to recover from its losses.

Strategists at BNY Mellon note that the Swiss National Bank is likely to keep policy unchanged for an extended period, which could reinforce the franc's role as a funding currency. However, they see scope for the currency to retrace some of its recent underperformance due to valuations pointing towards meaningful recovery potential.

The Middle East situation has improved following positive diplomatic developments, including a historic deal announced by US President Donald Trump outlining the complete disarmament of Hamas and the withdrawal of Israeli forces from Gaza. This breakthrough may lead to waning safe-haven demand for the USD, but the current market sentiment remains cautious due to hawkish Fed sentiment.