USD/CHF extends its downside below 0.9050, focus on US PMI data

• USD/CHF weakens to 0.9020 in Monday’s early European session. 
• Traders raised their bets on the Fed rate in September after the recent US PCE data for April. 
• The Swiss Real Retail Sales rose to 2.7% YoY in April, compared to -0.2% in March.

The USD/CHF pair extends the decline around 0.9020 during the early European trading hours on Monday. The softer US dollar (USD) after the US Personal Consumption Expenditures (PCE) Price Index inflation data drags the pair lower. Switzerland’s Consumer Price Index for May will be the highlight on Tuesday ahead of the US employment data. 

The uncertainties over the timing of the US Federal Reserve's (Fed) interest rate cut weigh on the US Dollar (USD) after the recent PCE report showed that US inflation remained steady in April. The headline US PCE rose 0.3% MoM in April, matching the unrevised gain in March, the Commerce Department reported on Friday. 

Additionally, the Core PCE, the Fed's preferred inflation gauge, rose 0.2% MoM in April, compared to a 0.3% gain in March. The core PCE price index climbed 2.8% on a yearly basis, matching the expectation. Investors have priced in nearly a 53% possibility of a Fed rate cut in September, an increase from 49% before the inflation report. Traders will watch the US ISM Manufacturing PMI for fresh impetus, which is expected to improve to 49.8 in May from 49.2 in April. In case of a stronger-than-expected outcome, this might dampen the expectation of the Federal Reserve (Fed) rate cut this year and cap the downside for the Greenback. 

On Friday, the Swiss Real Retail Sales improved to 2.7% YoY in April from a decline of 0.2% in March. The figure came in better than the estimation and supported the Swiss Franc (CHF) against its rivals. Apart from this, investors will closely watch the development surrounding Middle East geopolitical tensions. The BBC reported that Israeli Prime Minister Benjamin Netanyahu's administration reluctantly agreed to President Biden's proposal for a Gaza cease-fire on Sunday. Any signals of rising concerns might further lift safe-haven currencies like the CHF.