The US Dollar (USD) maintained its strength on Thursday, supported by hawkish signals from the Federal Reserve and ongoing uncertainty surrounding US-Iran relations, which impacted both gold and the Swiss Franc markets [1][2]. Minutes from the Federal Reserve’s April 28–29 meeting revealed that a majority of policymakers believe further policy firming would likely be appropriate if inflation remains above the 2% target, with officials broadly agreeing that inflation risks are skewed to the upside [1][2]. According to the CME Group's FedWatch Tool, traders are pricing in over a 50% chance of a 25 basis point rate hike in 2026 [1].
Geopolitical developments added to market volatility. US President Trump stated on Wednesday that the US is in the 'final stages' of talks with Iran, which initially boosted market optimism and expectations for the reopening of the critical Strait of Hormuz [1][2]. However, this optimism was tempered as Trump warned of potential military action if Iran does not agree to a peace deal, prompting a defiant response from Iranian President Masoud Pezeshkian, who stated that Tehran would not capitulate and dismissed coercion as 'nothing more than an illusion' [2]. Iran also launched a new 'Persian Gulf Strait Authority' to control traffic through the Strait of Hormuz, maintaining geopolitical risks [1].
In the currency markets, USD/CHF edged higher, trading around 0.7870 during Asian hours, as the USD advanced on the back of these developments [2]. On the Swiss side, preliminary data showed that Switzerland's economy grew by 0.5% quarter-on-quarter in the first three months of the year, up from 0.2% in the previous period, marking the strongest quarterly performance in a year [2]. Market participants are now awaiting the release of first-quarter 2026 Swiss Industrial Production data later in the day [2].
Gold (XAU/USD) struggled to sustain its recovery, stalling near the $4,450 level, the lowest since March 30, as the strong USD and hawkish Fed outlook acted as headwinds [1]. However, downside for gold was limited by ongoing geopolitical risks and investor caution regarding the US-Iran situation. Technically, XAU/USD maintains a modest bearish bias within a downward channel, with the Relative Strength Index at 46.60, indicating a neutral-to-soft momentum [1].
CONCLUSION
The combination of a hawkish Federal Reserve and persistent US-Iran tensions has bolstered the US Dollar, pressuring both gold and the Swiss Franc. While gold's downside is cushioned by geopolitical risks, the Swiss economy shows signs of recovery. Markets remain cautious, closely monitoring further developments in US-Iran negotiations and upcoming Swiss economic data.