The USD/CHF pair traded steadily near 0.9125 during early European hours on Thursday, as the US Dollar struggled to gain momentum. Cooler US inflation data has intensified market expectations of potential Federal Reserve (Fed) rate cuts in 2025, keeping the pair in a narrow range. Traders now turn their attention to the release of US December Retail Sales and weekly Initial Jobless Claims data, scheduled for later in the day.
The US Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 2.9% year-over-year (YoY) in December, up from 2.7% in November and matching market forecasts. Core CPI, which excludes food and energy, increased by 3.2% YoY, slightly below the expected 3.3%. The data bolstered speculation that the Fed might hold interest rates steady at its upcoming January meeting and could consider rate cuts by mid-year, with futures pricing suggesting a 50% likelihood of two reductions in 2025.
Geopolitical Tensions and Safe-Haven Demand
In the geopolitical sphere, Israel and Hamas have reportedly reached an agreement to pause the ongoing conflict in Gaza after 15 months of hostilities. The deal, expected to take effect on Sunday pending Israeli cabinet approval, has captured global attention. Investors are closely monitoring developments, as any signs of escalating tensions in the Middle East could trigger safe-haven flows, potentially strengthening the Swiss Franc (CHF).
Market Outlook
The USD/CHF pair remains range-bound as traders assess mixed economic signals and geopolitical risks. If US data later in the day points to a weakening economy, it could reinforce expectations of Fed rate cuts and weigh on the US Dollar further. Conversely, stronger-than-expected Retail Sales or employment data could lend support to the Greenback. Additionally, any deterioration in Middle East tensions might further bolster demand for the CHF as a safe-haven asset.
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