USD/CHF extends recovery above 0.8930 amid renewed USD demand, geopolitical tension in the Middle East eyed

• USD/CHF holds positive ground around the mid-0.8900s on Monday.
• The rising geopolitical tension in the Middle East might boost safe-haven flows.
• Many Fed officials signaled that rates would be held steady at its November meeting.

The USD/CHF pair hovers around 0.8935 during the early European session on Monday. The renewed US Dollar (USD) demand lends some support to the pair. However, geopolitical tensions continue to hang over the market and might cap the Greenback’s upside.

Fears that the Israel-Hamas confrontation would escalate into a larger Middle East battle grew on Sunday, with Washington warning of a significant risk to US interests in the region. Furthermore, Chinese state media stated early Monday that the situation in Gaza is "very serious," with the possibility of a large-scale ground conflict rising and the outlook "worrisome" as armed conflicts along neighboring borders spread. That being said, the rising geopolitical tension in the Middle East might boost safe-haven assets like Swiss France and act as a headwind for the USD/CHF pair.

Last week, the Swiss Trade surplus widened more than expected in September. Trade Balance arrived at 6,316M versus 3,814M seen in the previous month, above the market consensus of 3,770M. Meanwhile, Exports surged to 24,795M MoM in September from the previous reading of 20,932M whereas Imports came in at 18,480M MoM versus 17,118M prior.

Across the pond, Atlanta Fed President Raphael Bostic said on Friday that he doesn't think that the US central bank will cut the rate before the middle of next year. Fed Philadelphia President Patrick Harker reiterated his preference to keep interest rates unchanged. While Fed Cleveland President Loretta Mester said the US central bank is "at or near the peak of the rate hike cycle. However, the data released this week might convince the central bank about the future monetary policy path. The stronger-than-expected data might lift the Greenback and limit the downside of the USD/CHF pair.

About the data, September’s US budget deficit was $170 billion, according to the Treasury Department on Friday. The overall 2023 budget deficit was $1.695 trillion, 23% larger than the previous year and exceeding all pre-COVID deficits.

Looking ahead, market participants will focus on the US S&P Global PMI data on Tuesday. Additionally, the first reading of Q3 US Gross Domestic Product (GDP) growth will be released on Thursday, and the Core Personal Consumption Expenditures (PCE) will be due on Friday. On the Swiss front, the Swiss ZEW Survey for October will be released on Wednesday. These figures could give a clear direction to the USD/CHF pair.