USD/CHF fails to kiss 0.9800 on modest correction in DXY, focus is on US Inflation

• USD/CHF is going through a minor correction following the footprints of the DXY.
• Solid employment data and higher consensus for US CPI are underpinning a 75 bps rate hike by the Fed.
• A light economic calendar by the Swiss economy will shift the entire focus on US inflation.

The USD/CHF pair is facing correction after re-testing a three-week high at 0.9797 in the early Asian session. The unavailability of extreme buying interest at elevated levels has dragged the asset lower. However, the correction is mild for now and doesn’t warrant a bearish reversal as the odds of a consecutive 75 basis points (bps) interest rate hike by the Federal Reserve (Fed) are soaring vigorously.

The release of the outstanding US Nonfarm Payrolls (NFP) last week has provided the freedom to the Federal Reserve (Fed) to announce more rate hikes. The preliminary estimate for the job additions in June was 268K, however, the economic data landed at 372k. Adding to that, the jobless rate remained steady at 3.6%.

The US economy is maintaining its full employment levels for a decent period. The continuous elevation of interest rates by the Fed will restrict liquidity in the economy, which will result in the execution of ultra-filtered investment opportunities only. No doubt, the event may accelerate the jobless rate, but the Fed will still have enough room to play with the policy measures.

Meanwhile, the US dollar index (DXY) has corrected mildly after failing to hit 107.50. The asset has displayed a stellar performance in the Asian session.

Going forward, US inflation will remain a key event this week. As per the market participants, the plain-vanilla US inflation will land at 8.7%, a little higher than the prior print of 8.6%. This could be the peak of the price pressures.

On the Swiss franc front, Thursday’s Unemployment Rate failed to make a meaningful impact on the Swiss franc bulls. The monthly data remained in line with the estimates and the prior release of 2.2%.