USD/CHF edges higher to near 0.8620 on geopolitical tension, awaits US retail sales data

• USD/CHF moves on an upward trajectory as traders adopt a cautious stance.
• US has conducted a third military strike on a Houthi missile facility in Yemen.
• The recent Swiss inflation data could deter the SNB from reducing policy rates in the next policy meeting.

The USD/CHF pair continues its winning streak that started on Thursday, influenced by a cautious market stance due to concerns over the Israel-Gaza conflict potentially spreading in the region. Amid this geopolitical tension, the USD/CHF pair trades higher around 0.8620 during the Asian session on Wednesday.

The US Central Command has reported another airstrike targeting a Houthi missile facility in Yemen. The reason for this third military strike against Houthi targets is cited as an imminent threat posed by four missiles to merchant vessels and US Navy ships in the Red Sea.

The risk-off sentiment boosts demand for the US Dollar (USD), with the US Dollar Index (DXY) trading higher around 103.40. The recovery in US Treasury yields contributes to the support for the Greenback, along with some assertive remarks from Federal Reserve (Fed) officials.

US Federal Reserve Governor Christopher Waller emphasized that, despite positive developments in the inflation outlook, the central bank is not in a hurry to outline plans for rate cuts. Additionally, Atlanta Federal Reserve President Raphael Bostic suggested over the weekend that premature interest rate cuts could result in fluctuations in inflation.

The recent Swiss economic data, including a slight increase in consumer prices in December and an improvement in Swiss consumer demand in November according to Real Retail Sales figures, could potentially deter the Swiss National Bank (SNB) from reducing interest rates in the upcoming monetary policy meeting.

With the absence of the high-impact data on the Swiss economic calendar, traders observing the ongoing 54th World Economic Forum Annual Meeting in Davos, where over 28,000 leaders from around the world are participating. Global economic discussions and insights shared during the meeting can influence market sentiments. On the US economic front, traders are closely monitoring the upcoming US Retail Sales data for December, scheduled for release on Wednesday.