Key Moments
- USD/CHF trades 0.13% higher near 0.7830 during the Asian session on Monday as the US Dollar advances.
- Iran declines to participate in a second round of talks with the US, citing Washington’s stance and actions.
- Traders await Tuesday’s US March Retail Sales release, forecast to rise 1.3% MoM after a 0.6% gain.
USD/CHF Tracks Higher With Broader Dollar Gains
The USD/CHF pair is trading 0.13% higher, hovering close to 0.7830 in Monday’s Asian session. The move reflects broad-based strength in the US Dollar, with the Swiss Franc weakening as investors react to fresh geopolitical developments involving Iran and the United States.
At the time of writing, the US Dollar Index (DXY) – which measures the performance of the Greenback against a basket of six major currencies – is up 0.1%, trading near 98.30.
Geopolitical Tensions Escalate After Iran Rejects New Talks
Over the weekend, the Islamic Republic News Agency (IRNA) reported that Tehran declined to meet US representatives for a second round of talks. According to the report, the decision stemmed from what Iran described as Washington’s “excessive demands, unrealistic expectations, constant shifts in stance, repeated contradictions, and the ongoing naval blockade”.
Prior to Iran’s refusal to continue negotiations, US President Donald Trump had accused Tehran of breaching ceasefire commitments. In a post on Truth Social, he alleged that Iran fired at a French ship and a freighter from the United Kingdom (UK), claiming this violated the agreed terms.
US Data Watch: Retail Sales in Focus
On the domestic front, market participants are looking ahead to fresh US macroeconomic data. Investors are awaiting Tuesday’s release of US Retail Sales figures for March, a key gauge of consumer spending strength.
Consensus expectations point to a 1.3% Month-on-Month (MoM) increase in Retail Sales, compared with the previous 0.6% reading. The outcome could influence expectations around US economic momentum and, in turn, the near-term path of the Dollar.
| Indicator / Asset | Latest Detail |
|---|---|
| USD/CHF | Up 0.13%, trading near 0.7830 during Asian session on Monday |
| US Dollar Index (DXY) | Up 0.1%, trading near 98.30 at press time |
| US Retail Sales (March, MoM) | Expected +1.3% vs prior 0.6% |
Background: The US Dollar and Policy Drivers
The US Dollar (USD) is the official currency of the United States of America and serves as the “de facto” currency in a number of other jurisdictions where it circulates alongside local currencies. It is the most actively traded currency globally, accounting for over 88% of all foreign exchange turnover, with average daily transactions of $6.6 trillion, based on data from 2022.
Following the second world war, the USD replaced the British Pound as the primary global reserve currency. For much of its history, the Dollar was backed by gold, until the Bretton Woods Agreement in 1971 ended the Gold Standard.
Federal Reserve Policy And The Dollar
Monetary policy set by the Federal Reserve (Fed) is widely regarded as the dominant factor affecting the Dollar’s value. The Fed operates under a dual mandate: maintaining price stability by controlling inflation and promoting full employment. Its main mechanism for pursuing these objectives is the adjustment of interest rates.
When inflation exceeds the Fed’s 2% target and prices accelerate too quickly, the central bank typically responds by raising interest rates, which tends to support the USD. Conversely, if inflation falls below 2% or the Unemployment Rate is elevated, the Fed may cut rates, usually putting downward pressure on the Greenback.
Quantitative Easing And Quantitative Tightening
In particularly stressed market environments, the Federal Reserve can increase the supply of Dollars and implement quantitative easing (QE). QE involves significantly boosting the flow of credit in a constrained financial system and is considered a non-standard policy tool, deployed when interbank lending dries up due to concerns about counterparty risk. It is generally viewed as a last resort when rate cuts alone are unlikely to be effective.
QE was the Fed’s principal tool during the credit crunch associated with the Great Financial Crisis in 2008. Under QE, the Fed creates additional Dollars and uses them primarily to purchase US government bonds from financial institutions. This process usually results in a weaker US Dollar.
Quantitative tightening (QT) is the opposite process. Under QT, the Fed stops buying bonds from financial institutions and allows maturing bond principal to roll off without reinvestment. This reduction in balance sheet support is typically considered positive for the US Dollar.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
