Market Analysis

Buyers are drawn to the USD/CHF above 0.8650; pay attention to the US PPI report

Amos Simanungkalit · 13 Aug 20247.2K Views

The USD/CHF pair is trading with a bullish bias around 0.8670 during early European hours on Tuesday. Market participants are adopting a cautious approach, preferring to stay on the sidelines ahead of key US economic data releases this week. Notably, the US Producer Price Index (PPI), Consumer Price Index (CPI), and Retail Sales figures are scheduled to be released on Tuesday, Wednesday, and Thursday, respectively.

According to the CME FedWatch Tool, traders are currently pricing in a 47.5% probability that the US Federal Reserve (Fed) will reduce interest rates by 50 basis points (bps) at its September meeting, a slight decrease from 52.5% last Friday. Should this week’s US inflation data reveal that inflation remains elevated, it could reduce the likelihood of a Fed rate cut and bolster the US Dollar (USD).

Projections suggest the US Producer Price Index (PPI) will ease to 0.1% month-over-month in July, down from 0.2% previously. Meanwhile, the Consumer Price Index (CPI) inflation rate is expected to decline from 3.0% year-over-year in July to 2.9% in June.

Conversely, escalating geopolitical tensions in the Middle East and economic uncertainties may strengthen demand for safe-haven currencies like the Swiss Franc (CHF). On Monday, Israel intensified its operations in the southern Gaza city of Khan Younis, raising the possibility of a broader Middle East conflict. Israel is also preparing for potential retaliation from Iran and the Lebanese militia Hezbollah following the killing of Hamas leader Ismail Haniyeh in Tehran in late July.