USD/CHF stabilizes below 0.9200 as investors digest US Inflation-inspired uncertainty

• USD/CHF has shifted its auction below 0.9200 despite the cheerful market mood.
• The market sentiment could get dismal if the US inflation figure shows a U-turn after declining for three months.
• An increase in the Swiss CPI has bolstered the case of more interest rate hikes by the Swiss National Bank ahead.

The USD/CHF pair has shifted its business below the round-level resistance of 0.9200 in the early Asian session. The Swiss Franc asset is expected to deliver more losses as investors have ignored the consequences associated with the United States inflation, in case it delivers a surprise upside. The risk appetite of the market participants has improved dramatically and has provided support to the risk-sensitive assets.

S&P500 futures are looking to extend their upside as investors have also ignored the geopolitical fears linked to the airborne threats to the United States. The US Dollar Index (DXY) is struggling to reclaim the critical resistance of 103.00 amid the risk-on mood. Meanwhile, a recovery in the demand for US government bonds has dragged the 10-year US Treasury yields to near 3.70%.

Investors seem casual ahead of the release of the US Inflation, however, the market sentiment could get dismal if the inflation figure show a U-turn after declining significantly for the past three months.

Analysts at TD Securities have forecasted a firm 0.4% MoM gain in the core CPI series. In terms of the headline, we expect CPI inflation to register its firmest MoM gain since October, posting a strong 0.4% increase. Our MoM projections imply that inflation likely lost speed again on a YoY basis in January as we look for inflation to drop to 6.2% for the headline (after 6.5% YoY in December), and to ease to 5.5% YoY for the core series (after 5.7% in January).”

On the Swiss Franc front, an increase in the Consumer Price Index (CPI) has bolstered the case of more interest rate hikes by the Swiss National Bank (SNB) ahead. On Monday, the Swiss Federal Statistical Office reported a rise in the monthly CPI figure by 0.6% vs. the consensus of 0.4%. And, the annual inflation rate rose to 3.3% from the estimates of 2.9% and the former release of 2.8%.

SNB Chairman Thomas J. Jordan has already cleared that the inflationary pressures are beyond the control of the central bank. Therefore, the case calls for more interest rate hikes by the SNB ahead.