USD/CHF advances to 0.7870, eyes monthly top as inflation worries lift USD ahead of US PCE

The USD/CHF pair prolongs its uptrend for the fourth straight day and climbs to the 0.7870 region, back closer to the monthly peak during the Asian session on Friday. Spot prices remain on track to register gains for the second consecutive week as traders now look to the US Personal Consumption Expenditures (PCE) Price Index for a fresh impetus.

The crucial US data would influence market expectations about the Federal Reserve (Fed) policy outlook amid expectations that a war-driven surge in Oil prices will rekindle inflation and force the central bank to delay cutting rates. In fact, the black liquid remains close to the $100 psychological mark as a further escalation of tensions in the Middle East and the closure of the Strait of Hormuz continue to fuel supply disruption fears.

In fact, market expectations have shifted toward only one 25-basis-point (bps) Fed rate cut in 2026, most likely in December. This remains supportive of elevated US Treasury bond yields and assists the US Dollar (USD) to attract some follow-through buying. The USD Index (DXY), which tracks the Greenback against a basket of currencies, approaches the three-month high, touched on Monday, and acts as a tailwind for the USD/CHF pair.

Meanwhile, rising geopolitical tensions continue to weigh on investors' sentiment, which is evident from a generally weaker tone around the equity markets. The anti-risk flow, however, does little to benefit the safe-haven Swiss Franc (CHF) as the Swiss National Bank (SNB) has ramped up its readiness to intervene in FX markets. This, in turn, favors the USD/CHF bulls and backs the case for a further near-term appreciating move.