USD/CHF sets for further breakdown below 0.8840 amid upbeat market mood

• USD/CHF is expected to extend its downside journey below 0.8840 as the market sentiment is bullish.
• The US Dollar Index has extended its three-day losing streak as only one interest rate hike has been left in the toolkit of the Fed.
• Apart from the US inflation data, investors will focus on the Fed’s Beige Book.

The USD/CHF pair has delivered a perpendicular fall to near 0.8840 in the early European session. The Swiss Franc asset is expected to deliver further breakdown as the market mood is quite upbeat and the appeal for the US Dollar Index (DXY) is extremely weak.

S&P500 futures have turned choppy after a bullish trading session, awaiting a fresh trigger for further action. c Federal Reserve (Fed), which will be announced this month. The yields offered on 10-year US treasury bonds have dropped below 4.0%.

This week, the major trigger for the USD Index will be the Consumer Price Index (CPI) data, which will release on Wednesday at 12:30 GMT. As per the preliminary report, monthly headline CPI delivered a higher pace of 0.3% vs. the former pace of 0.1%. Also, core inflation that excludes oil and food prices is expected to match the headline CPI pace.

Meanwhile, annualized headline CPI is expected to decelerate to 3.1% against the former release of 4.0%, and core inflation is seen softening to 5.0% vs. May’s figure of 5.3% in a similar period.

Apart from the US inflation data, investors will focus on the Fed’s Beige Book, which is expected to show the current economic situation and the outlook.

An absence of economic events in the Swiss Franc economy will keep the spotlight on the US Dollar. However, about the Swiss National Bank’s (SNB) interest rate guidance, analysts at MUFG believe that another 25 bps rate hike in September seems more likely than not at this stage. Another rate hike with core CPI unchanged at the current level (1.9%) or lower would take the SNB’s policy rate in real terms into positive territory – joining the RBNZ, the Fed, and the BoC.