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USD/CHF drops to near 0.8750

The USD/CHF pair drops to near its immediate support of 0.8750 in the European session. The Swiss Franc asset faces pressure amid the directionless US Dollar Index (DXY) ahead of the United States Retail Sales data for July, which will be released at 12:30 GMT. S&P500 futures posted some losses in London, portraying a cautious market mood amid an economic slowdown in the Chinese economy due to rising deflation risks. Economic risks in China have improved the appeal of the US Dollar as a safe haven significantly.

The USD Index oscillates in a narrow range of 103.00 as investors await the consumer spending data for further guidance. As per the estimates, monthly consumer spending momentum is seen expanding at a higher pace of 0.4% vs. June’s pace of 0.2%. A similar performance is expected in retail sales data excluding automobiles. Resilience in consumer spending and tight labor market conditions could force the Federal Reserve (Fed) policymakers to keep interest rates elevated for a longer period. The sustainability of higher interest rates could also propel fears of a recession in the US economy.

In addition to the US consumer spending data, investors will also focus on the Federal Open Market Committee (FOMC) minutes, which will be released on Wednesday. Investors would look for cues about the interest rate guidance. Meanwhile, the Swiss Franc remains subdued as July’s Producer and Import prices display deflation. Monthly economic data contracted at a 0.1% pace while annual figures remained deflated at 0.6%. This indicates that Swiss inflation is under control and the Swiss National Bank is well-handling the inflation situation. A survey from Bloomberg showed that the SNB will raise interest rates by 25 basis points (bps) in September to 2%.