The USD/CHF pair is maintaining a bullish stance around 0.8670 in early European trading on Tuesday, as market participants adopt a cautious approach ahead of crucial U.S. economic data releases this week. The U.S. Producer Price Index (PPI), Consumer Price Index (CPI), and Retail Sales figures are scheduled for release on Tuesday, Wednesday, and Thursday, respectively.
According to the CME FedWatch Tool, traders are currently assigning a 47.5% probability that the U.S. Federal Reserve (Fed) will reduce interest rates by 50 basis points at its September meeting, a slight decrease from 52.5% last Friday. Should this week’s U.S. inflation data indicate persistent inflationary pressures, the likelihood of a Fed rate cut could diminish, potentially strengthening the U.S. Dollar (USD).
Projections suggest the U.S. PPI may ease to 0.1% month-over-month in July, down from the previous 0.2%. Meanwhile, CPI inflation is expected to decrease from 3.0% year-over-year in June to 2.9% in July.
On the other hand, escalating geopolitical tensions in the Middle East and ongoing economic uncertainty could bolster the appeal of the Swiss Franc (CHF) as a safe-haven currency. On Monday, Israel intensified its military operations in the southern Gaza city of Khan Younis, raising concerns about a broader conflict in the region. Israel is also preparing for potential retaliatory attacks from Iran and the Lebanese militia Hezbollah following the assassination of Hamas leader Ismail Haniyeh in Tehran in late July.
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