USD/CHF strengthens to near as traders brace for US Retail Sales release

• USD/CHF drifts higher to near 0.9045 in Friday's early European session. 
• US PPI inflation dampens Fed rate cut odds. 
• Israel said Hamas must release three hostages on Saturday, or war will resume. 

The USD/CHF pair gains ground to around 0.9045 during the early European session on Friday. The renewed US Dollar (USD) demand provides some support to the pair. However, the safe-haven flows amid the uncertainty and geopolitical risks might cap the upside of USD/CHF. 

The hotter-than-expected US Producer Price Index (PPI) reinforced expectations that the US Federal Reserve (Fed) will keep interest rates for an extended period. Additionally, Fed Chair Jerome Powell highlighted that the Fed is in no rush to cut interest rates due to continued strength in the labor market and solid economic growth.

BMO's Scott Anderson emphasized the Fed's growing caution regarding future rate cuts, noting that "higher-for-longer interest rates is becoming the mantra again. Traders will keep an eye on the release of US Retail Sales for January, which is due later on Friday. In case of a hotter outcome, this could further lift the USD against the Swiss Franc (CHF). 

Data released by the Swiss Federal Statistical Office on Thursday showed that Switzerland's Consumer Price Index (CPI) inflation eased to 0.4% YoY in January from 0.6% in December. This figure came in line with market expectations and registered the lowest level since April 2021. On a monthly basis, the CPI declined by 0.1%, maintaining the same pace as the previous period.

Meanwhile, the uncertainty and geopolitical concerns are likely to boost the traditional safe-haven currency like the Swiss Franc (CHF). The Israeli government stated that it plans to stick to the hostage-release timeline agreed upon in the cease-fire agreement with Hamas, but has warned that if the expected three hostages are not released on Saturday, it would return to war.