USD/CHF declines to near 0.9150 as traders brace for US PPI data

• USD/CHF drifts lower to near 0.9160 in Tuesday's early European session. 
• Markets lower Fed rate cut expectations this year after the stronger-than-expected US December NFP report. 
• The uncertainty and geopolitical risks could support a safe-haven currency like the Swiss Franc. 

The USD/CHF pair softens to around 0.9160, snapping the five-day winning streak during the early European session on Tuesday. The pair edges lower on the back of the decline in the US Dollar (USD). However, the expectations that the US Federal Reserve (Fed) will approach interest rate cuts cautiously this year might cap the pair's downside. 

Meanwhile, the US Dollar index (DXY), which measures the USD against a basket of currencies, currently trades near 109.55 after retreating from 110.17, its highest level since November 2022. The downside for the pair might be limited amid the concerns about rising inflation and limited prospects for further Fed rate cuts. Markets are now pricing in one rate reduction from the Fed by year-end, down from roughly two quarter-point cuts priced at the start of the year.

Traders will keep an eye on the US December Producer Price Index (PPI), which is due later on Tuesday. On Wednesday, the US December Consumer Price Index (CPI) inflation data will be the highlight. Any upside surprise could further close the door on future easing, which might lift the Greenback. A slew of Fed officials are also due to speak later this week. 

Investors will closely watch the developments surrounding the geopolitical tensions in the Middle East. The United States has indicated that a ceasefire deal is "on the brink" of success, while Hamas said talks are progressing well, according to a statement issued after a meeting with Qatar's emir. However, any sign of escalating geopolitical risks could boost the safe-haven flows, benefiting the Swiss Franc (CHF).