USD/CHF remains subdued around 0.8450, eyes on US inflation report

• USD/CHF extends its downside ahead of the release of US CPI data on Wednesday.
• CME FedWatch Tool suggests full pricing of at least a 25 basis point Fed rate cut in September.
• The upside of the Swiss Franc could be limited due to the rising odds of another SNB rate cut soon.

USD/CHF continues to lose ground, trading around 0.8430 during the Asian hours on Wednesday. US Dollar (USD) faces challenges as the Treasury yields continue to decline ahead of the US Consumer Price Index (CPI) data scheduled to be released later in the North American hours.

The upcoming inflation report may offer fresh cues regarding the potential magnitude of the Federal Reserve's (Fed) interest rate cut in September. Moreover, the recent US labor market report has cast doubt on the possibility of an aggressive Fed interest rate cut.

According to the CME FedWatch Tool, markets are fully anticipating at least a 25 basis point (bps) rate cut by the Federal Reserve at its September meeting. The likelihood of a 50 bps rate cut has slightly decreased to 31.0%, down from 38.0% a week ago.

Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee remarked on Friday that Fed officials are starting to align with the broader market's sentiment that a policy rate adjustment by the US central bank is imminent, according to CNBC.

FXStreet's FedTracker, which uses a custom AI model to evaluate Fed officials' speeches on a dovish-to-hawkish scale from 0 to 10, rated Goolsbee's comments as dovish, assigning them a score of 3.2.

In Switzerland, inflation fell to a five-month low, increasing speculation about the possibility of another rate cut by the Swiss National Bank (SNB) in the near future. Traders are expected to closely monitor any speeches from SNB members this week, as there are no major economic releases scheduled.