The USD/CHF pair is trading on a weaker note, around 0.8960, during the early European session on Friday. This is driven by a softer US Dollar following an unexpected decline in US consumer prices for June. Investors are now focused on the US June Producer Price Index (PPI) and the preliminary July Michigan Consumer Sentiment gauge, both scheduled for release later on Friday, for further direction.

The latest data from the Bureau of Labor Statistics revealed that the US Consumer Price Index (CPI) fell by 0.1% month-over-month in June after remaining unchanged in May. This marked the lowest monthly reading since May 2020. On an annual basis, the CPI rose by 3% in June, the lowest reading in a year. The softer inflation figures have heightened expectations that the Federal Reserve will cut interest rates in the coming months.

Chicago Fed President Austan Goolsbee described the latest inflation” data as “e”cellent,” suggesting that the reports indicate the Fed is on track to meet its 2% target. Similarly, St. Louis Fed President Alberto Musalem highlighted “encouraging further”progress” the Fed’s inflation goal. San Francisco Fed President Mary Daly added that the cooling of price pressures supports the case for rate cuts, though the timing remains debatable. Consequently, the US Dollar has edged lower amid growing speculation of a Fed rate cut this year, with traders now seeing nearly an 85% chance of easing in September, according to Group’s FedWatch Tool.

On the Swiss front, geopolitical tensions, political uncertainty in the US and Europe, and concerns about a global economic slowdown are bolstering safe-haven assets like the Swiss Franc (CHF). However, speculation that the Swiss National Bank (SNB) might further cut interest rates could exert some selling pressure on the CHF.

Trade Idea:
Consider shorting USD/CHF around 0.8960 with a target of 0.8900, as Fed rate cut expectations weigh on the USD and safe-haven demand supports the CHF.