USD/CHF looks vulnerable above 0.8900 as uncertainty over US debt ceiling extends

• USD/CHF is struggling in keeping its auction well above 0.8900 amid a correction in the USD index.
• Speaker McCarthy has denied the approval of raising the debt ceiling without reducing the budget deficit.
• An expression of persistent US inflation would force the Fed to reconsider its neutral guidance.

The USD/CHF pair is struggling in maintaining its auction above the round-level support of 0.8900 in the Asian session. The Swiss Franc asset is expected to display more downside as uncertainty over the US debt ceiling crisis has carry-forwarded as meetings among White House and Republican leaders ended without any conclusion.

S&P500 futures have generated some gains in the Tokyo session despite a cautionary approach ahead of United States inflation data.

Republican House of Representatives Speaker Kevin McCarthy has denied the approval of the debt ceiling raise without reducing the budget deficit. However, US President Joe Biden believes that cuts in spending initiatives could hurt Americans ahead.

The US Dollar Index (DXY) has faced barricades while extending its recovery above the immediate resistance of 101.70. Investors are expected to remain anxious ahead of the release of the US Consumer Price Index (CPI) data. Monthly headline inflation is seen accelerating by 0.4% vs. the former pace of 0.1%. Annual headline inflation is expected to remain steady at 5.0% while core CPI that excludes oil and food prices is seen softening to 5.5% from the prior release of 5.6%. The 10-year US Treasury yields have declined marginally below 3.52%.

An expression of persistent US inflation would force the Federal Reserve (Fed) to reconsider its neutral guidance on interest rates.

On the Swiss Franc front, the Swiss National Bank (SNB) is expected to slow down the pace of hiking interest rates as the annual CPI (April) has softened to 2.6% from the former release of 2.9%. Monthly inflation remained stagnant while the street was anticipating an escalation by 0.5%.