USD/CHF rallies above 0.8800 ahead of US Retail Sales

• USD/CHF looks set for a rally after remaining restricted around 0.8780 amid strength in the US Dollar.
• Fed policymakers are expected to pause its year-long rate-tightening spell.
• The SNB is expected to raise interest rates by 25 bps in September to 2%.

The USD/CHF pair gathers strength for a rally above the immediate resistance of 0.8780 in the European session. The Swiss Franc asset is expected to test the round-level resistance of 0.8800 amid strength in the US Dollar Index (DXY) inspired by the modest recovery in inflation and higher-than-expected Producer Price Index (PPI) data for July.

S&P500 futures add some gains in London on hopes that the Federal Reserve (Fed) will pause the policy tightening spell in September. Fed policymakers are expected to pause its year-long rate-tightening spell as inflation is expanding at a nominal monthly pace of 0.2%. The 0.2% monthly pace in inflation is in alignment with the Fed’s desired rate of 2%.

The Fed is highly expected to deliver an unchanged interest rate decision in September. However, interest rates will remain elevated for a longer period so that the return of inflation to 2% could be ensured. This would keep fears of recession steady.

After a modest inflation increase, investors await the United States Retail Sales data for July on Tuesday, which will be published at 12:30 GMT. Per estimates, consumer spending momentum remained at a higher pace of 0.4%, higher than June’s reading of 0.2%.

On the Swiss Franc front, investors start getting concerned about the interest rate decision from the Swiss National Bank (SNB), which will be announced in September. A survey from Bloomberg showed that the SNB will raise interest rates by 25 basis points (bps) in September to 2%. Regarding the inflation guidance, the survey indicates that the Consumer Price Index (CPI) will be at 1.5% in 2024.