• USD/CHF drifts lower for the fifth straight day and drops to a 2-1/2 year trough on Wednesday.
• Expectations that the Fed is done with its rate-hiking cycle weigh on the USD and exert pressure.
• A positive risk tone undermines the CHF and lends some support ahead of the key US CPI report.

The USD/CHF pair remains under some selling pressure for the fifth successive day on Wednesday and drops to its lowest level since January 2021 during the early European session. Spot prices, however, manage to recover a few pips in the last hour and currently trade around the 0.8780-0.8785 region, down only 0.10% for the day.

The recent US Dollar (USD) downtrend witnessed over the past week or so, to a two-month low, remains uninterrupted in the wake of speculations that the Federal Reserve (Fed) is nearly done with its policy tightening. Investors now seem convinced that the US central bank will end its rate-hiking cycle following the expected lift-off in July, which is reinforced by the ongoing retracement slide in the US Treasury bond yields. This, in turn, is seen weighing on the USD and turning out to be a key factor dragging the USD/CHF pair lower.

The closely-watched US employment details released on Friday showed that the economy added the fewest jobs in 2-1/2 years in June and indicated that the labor market is cooling. Furthermore. the New York Fed's monthly survey revealed on Monday that the one-year consumer inflation expectation dropped to 3.8% in June - the lowest level since April 2021. This, in turn, fueled speculations about a further deceleration in US consumer inflation, which should allow the US central bank to soften its hawkish stance sooner rather than later.

Hence, the market focus remains glued to the release of the latest US consumer inflation figures, due later during the early North American session. Heading into the key data risk, a modest recovery in the global risk sentiment - as depicted by a generally positive tone around the equity markets - undermines the safe-haven Swiss Franc (CHF) and helps limit losses for the USD/CHF pair, at least for the time being. The fundamental backdrop, however, favours bearish traders and suggests that the path of least resistance for spot prices is to the downside