• USD/CHF moves on an upward trajectory amid market caution.
• Traders observe the five-day World Economic Forum in Davos to gain cues on the global economic scenario.
• US Dollar rises on upbeat US Dollar, coupled with hawkish remarks from Fed’s Bostic.

USD/CHF extends its gains for the fourth-consecutive session, trading higher near 0.8590 during the European hours on Tuesday. The Swiss Franc (CHF) faces challenges amid risk-off sentiment due to the threat of war escalation in the Middle East region. This threat is reinforced by a reported missile launched by Iran’s Islamic Revolutionary Guard Corps (IRGC) targeting northern Iraq near the US Consulate in Erbil.

With no high-impact data expected from Switzerland, market participants are likely directing their attention to the five-day World Economic Forum taking place in Davos. The 54th World Economic Forum Annual Meeting is set to host over 28,000 leaders from around the world. Additionally, Swiss Producer and Import Prices data are scheduled for release on Friday, which could provide insights into Swiss economic trends.

The US Dollar Index (DXY) trades higher, nearing 102.90, with the 2-year and 10-year yields on US Treasury coupons standing at 4.19% and 3.99%, respectively, at the time of writing. The US Dollar's strength is further supported by hawkish comments made by Atlanta Federal Reserve (Fed) President Raphael Bostic over the weekend. According to a Financial Times report, Bostic suggested the potential for inflation to "see-saw" if policymakers decide to reduce interest rates prematurely, providing underlying support to the USD/CHF pair.

The US Dollar strengthens amid market caution caused by the heightened geopolitical conflict between Israel and Gaza, which has disrupted trade in the Red Sea. The persistent targeting of maritime vessels by the Iran-backed Houthi group, despite recent military strikes by the United States (US) and the United Kingdom (UK) on Houthi sites in Yemen, is contributing to the risk-off sentiment. Market participants will closely monitor the US NY Empire State Manufacturing Index for January and a speech by Federal Reserve official Christopher J. Waller later on Tuesday, which could further influence market dynamics.