USD/CHF Pauses Amid Rate Hike Expectations and US Inflation Data

The US Dollar (USD) has been declining ahead of the Federal Reserve's interest rate decision, causing the USD/CHF pair to inch lower. However, hotter-than-expected US inflation data released last week has solidified expectations of further monetary tightening by the Fed.

Financial markets are broadly anticipating a 25 basis point rate hike at the upcoming policy meeting, which would lift the benchmark overnight rate to a range of 3.75% to 4.00%. The CME FedWatch tool indicates that traders are pricing in nearly a 92.4% probability of this quarter-point increase.

Strategists at UOB Group note that they have turned positive on USD late last week and reiterate that upward momentum continues to build, but it remains unclear whether it is sufficient for USD to rise to the significant resistance at 0.8205.