Market Analysis

The USD/CHF pair is trading flat near 0.8655 during the early European session on Thursday. Traders might be cautious and stay on the sidelines ahead of the major US economic data releases later today. Meanwhile, the USD Index (DXY), which measures the value of the US Dollar against a basket of foreign currencies, is around 102.55, down 0.05% on the day.

The latest US Consumer Price Index (CPI) report shows that inflation is on track to reach the Federal Reserve’s 2% target. However, expectations for a significant rate cut from the Fed have decreased. The CME FedWatch Tool now suggests a 41% chance of a 50 basis points (bps) rate cut in September, down from 50% before the CPI data was released.

Atlanta Fed President Raphael Bostic stated on Tuesday that he needs more evidence before supporting a rate cut. Conversely, Chicago Fed President Austan Goolsbee expressed increased concern about the labor market rather than inflation, given the recent progress on price pressures and weak employment data.

Attention will be on the US Retail Sales and weekly Initial Jobless Claims data released today. Retail Sales are anticipated to increase by 0.3% month-over-month in July, while Initial Jobless Claims for the week ending August 10 are expected to rise to 235K from 233K the previous week. Additionally, Fed officials Alberto Musalem and Patrick Harker are scheduled to speak later today.

On the Swiss side, rising geopolitical tensions in the Middle East could strengthen the safe-haven Swiss Franc (CHF) and put pressure on the USD/CHF pair. Aljazeera reported that Israeli military strikes targeted Hamad City and residential buildings in Khan Younis in the southern Gaza Strip, following deadly attacks across Palestinian territories on Wednesday. These geopolitical developments are likely to be closely monitored by market participants and could impact the USD/CHF pair in the short term.

Paraphrasing text from "FX Street" all rights reserved by the original author.