USD/CHF corrects gradually to 0.8860, upside remains favored amid stubborn US Inflation

• USD/CHF delivers a mild correction from an 11-week high of 0.8880 as the USD Index turns subdued.
• The broader appeal for the US Dollar remains upbeat as investors see the first rate cut by the Fed in July.
• The SNB may rollback its restrictive interest rate stance sooner amid easing price pressures.

The USD/CHF pair delivers a moderate corrective move from an 11-week high of 0.8880 in the late Asian session on Wednesday. The corrective move seems profit-booking after a strong rally inspired by January's sticky United States inflation data. Therefore, more upside in the Swiss Franc asset is anticipated.

S&P500 futures have posted nominal gains in the Asian session, portraying some ease in the risk-aversion theme. The broader market sentiment is negative as stubborn US Consumer Price Index (CPI) data has pushed back expectations of rate cuts by the Federal Reserve (Fed) in the March monetary policy meeting. The US Dollar Index (DXY) oscillates in a tight range near 104.80 after a vertical upside move.

As per the CME Fedwatch tool, traders see a 38% chance for a rate cut of 25 basis points (bps), which have come down from 50% after the release of the persistent inflation report.

The core CPI data that excludes volatile food and oil prices rose at a steady pace of 3.9%, while investors forecasted a decline to 3.9%. Fed policymakers generally consider the core inflation data for the preparation of remarks for monetary policy. Stubborn core inflation data would strengthen the argument supporting keeping interest rates restricted for longer.

Meanwhile, the Swiss Franc has come under pressure as price pressures in the Swiss economy have decelerated significantly. In January, the monthly CPI grew by 0.2% after remaining stagnant in December, which investors anticipated a growth of 0.6%. Annual inflation decelerated significantly to 1.3% from expectations and a prior reading of 1.7%. This would allow the Swiss National Bank (SNB) to unwind its restrictive monetary policy stance.