USD/CHF stays below 0.8100 after pulling back from three-month lows

• USD/CHF depreciates as the US Dollar struggles due to the US government deadlock.
• The Greenback may recover ground due to cautious Fed policy outlook.
• The Swiss Franc gains support as safe-haven demand rises amid a global selloff in risk assets.

USD/CHF loses ground after five days of gain, retreating after reaching a three-month high of 0.8108 reached in the previous session. The pair is trading around 0.8090 during the European hours on Wednesday, as the US Dollar (USD) remains subdued amid the ongoing US government shutdown.

Traders adopt caution as the deadlock has now entered its sixth week and is poised to become the longest federal funding lapse in US history after the Senate once again failed to pass a short-term funding bill. The most recent attempt to resolve the standoff, Republican-backed temporary legislation, was rejected by the Senate for the 14th time on Tuesday.

However, the USD/CHF pair may regain its ground as the Greenback could further advance due to the cautious sentiment surrounding the US Federal Reserve (Fed) policy stance for December. Fed Chair Jerome Powell stated during last week's post-meeting press conference that another rate cut in December remains uncertain. Powell also cautioned that policymakers might need to adopt a wait-and-see stance until the release of new official data resumes.

The Swiss Franc (CHF) receives support from the increased safe-haven demand, driven by a global selloff in risk assets. Global stocks and other risk assets came under pressure as concerns mounted over inflated AI valuations. Risk aversion intensified following warnings from major Wall Street bank CEOs about possible market corrections.

The CHF faced challenges after softer-than-expected inflation data were released earlier this week, fueled speculation that the Swiss National Bank (SNB) may consider returning to negative interest rates to counter persistent disinflationary pressures.