Swiss Franc advances as US Dollar slips despite Fed rate hike odds

USD/CHF declines after two days of gains, trading around 0.8140 during the Asian hours on Tuesday. Traders will likely observe the Swiss Producer and Import Prices data for June due later in the day.

However, the downside of the pair could be restrained as the US Dollar (USD) could receive support from rising safe-haven demand due to escalating Middle East tensions. US Central Command (CENTCOM) announced new precision strikes on Iranian military targets, noting that over 50,000 US service members are currently deployed across the Middle East. Meanwhile, Iran’s IRGC stated that two "offending supertankers" were disabled in the Strait of Hormuz after ignoring warnings and using a mined route. Iran warned that cooperating with the US would delay the waterway's reopening and trigger a global energy crisis.

Hormuz tensions drive oil higher, stoking fears that energy-driven inflation will force the Federal Reserve (Fed) to keep interest rates elevated. Market expectations have shifted rapidly in response, with the CME FedWatch Tool now showing a 51% probability of a Fed rate hike in September, compared to just a 23% chance that rates will stay on hold.

US June Consumer Price Index (CPI) report is scheduled to be released on Tuesday. Analysts anticipate a divergence between a 0.1% month-on-month decline in headline inflation and a sticky 0.3% increase in the core reading. Fed Chair Kevin Warsh will deliver highly anticipated congressional testimony, a session that traders will dissect word-by-word for hints on whether the central bank will validate the market's growing hawkishness.