USD/CHF consolidates near 0.8772 in Tuesday’s early European session.
Fed officials highlighted that the central bank remained data-dependent before they were confident that inflation is sustainably returning 2% target.
The rising concerns in the Middle East could lift the Swiss Franc, a safe-haven currency.
Market players will closely monitor the US February CPI inflation data on Tuesday.
The USD/CHF pair trades sideways above the mid-0.8700s during the early European session on Tuesday. Investors prefer to wait on the sidelines ahead of the key US inflation report later in the day. In the meantime, a cautious mood in the market could provide some support to the Swiss Franc (CHF). USD/CHF currently trades around 0.8772, unchanged for the day.
The Federal Reserve's (Fed) officials emphasized last week that the US central bank remains data-dependent and wants to feel confident that inflation is sustainably returning to the Fed’s 2% target. Money markets have priced in 70% odds of a rate cut in June, while the chance for a May rate cut stays at 22%, according to the CME FedWatch Tool. Investors await the US CPi inflation data for fresh impetus.
The headline CPI figure is forecast to remain steady at 3.1% YoY in February, while the Core CPI figure is estimated to drop to 3.7% YoY in February from 3.9% in January. This data could trigger volatility in the market. The stronger-than-expected report could dampen hopes of a rate cut by the Fed, which might lift the US Dollar (USD) and create a tailwind for USD/CHF.
On the other hand, the rising geopolitical tensions in the Middle East could boost safe-haven assets like the Swiss Franc (CHF) and cap the upside of the pair. There are rising concerns of violence spreading, especially to Jerusalem, during the Islamic holy month of Ramadan, as a ceasefire remains elusive, per the BBC.
Moving on, investors will closely watch the US February CPI inflation data, due later in the day. Later this week, the focus will shift to US Retail Sales for February, which is expected to show an increase of 0.8% YoY. On Friday, the US Industrial Production and Michigan Consumer Sentiment Index will be released.
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