USD/CHF rallies to 0.8800 on soft Swiss Inflation data, US CPI eyed

• USD/CHF soars to 0.8800, prompted by soft Swiss inflation figures.
• Swiss annual inflation data softened to 1.3% from the expectations and the former reading of 1.7%.
• The US Dollar falls from the day’s high while investors remain cautious ahead of US Inflation data.

The USD/CHF pair witnesses a stellar buying interest and reaches to the round-level resistance of 0.8800 in the European session on Tuesday after a soft Swiss Consumer Price Index (CPI) report for January.

The monthly CPI grew at a slower pace of 0.2% against the consensus of 0.6%. In December, price pressures remained stagnant. Annual inflation decelerated significantly to 1.3% from expectations and the prior reading of 1.7%. The Swiss economy is consistently operating below 2% inflation, which would allow the Swiss National Bank (SNB) to unwind its restrictive monetary policy stance.

S&P500 futures have posted decent losses in the London session, portraying caution among market participants ahead of the United States inflation data for January, which will be published at 13:30 GMT. Meanwhile, the US Dollar Index (DXY) has surrendered all of its intraday gains.

According to the expectations, the headline CPI grew at a steady pace of 0.2% on a monthly basis. In a similar timeframe, the core CPI that excludes volatile food and oil prices rose steadily by 0.3%. The annual headline inflation is anticipated to decelerate to 2.9% from 3.4% in December, while core CPI rose at a slightly slower pace of 3.7% against 3.9%.

Decelerating price pressures would allow the Federal Reserve (Fed) to consider rate cuts in the May policy meeting as anticipated by investors. However, Fed policymakers have been reiterating that they need progress in declining inflation for months before reducing interest rates.