Swiss Franc rebounds as markets await US PCE data and monitor Lebanon-Israel tensions

The USD/CHF pair edges lower to around 0.8110, retreating from an 11-month high during the early European trading hours on Thursday. Markets might turn cautious later in the day ahead of the US Personal Consumption Expenditures (PCE), the Fed’s preferred inflation gauge, report for May, which might offer some hints about the US interest rate path. 

Traders have ramped up bets of a US rate hike after a surprisingly hawkish-sounding debut from Kevin Warsh as Federal Reserve (Fed) chair last week.  Markets expect three Fed rate hikes this year and are pricing in about 66.4% probability of a September increase, according to the CME FedWatch Tool.

Market participants will closely monitor the Middle East as Lebanon and Israel discuss a US-backed proposal for Israeli forces to transfer some of the Lebanese territory invaded in their war with Hezbollah to Lebanon’s military.

The Israeli defence minister, Israel Katz, said on Thursday that the Israeli military would not withdraw from southern Lebanon despite pressure from the US, as fighting in Lebanon continues to be an obstacle to permanent peace, per the Guardian. Any signs of rising tensions in the Middle East could boost a safe-haven currency such as the Swiss Franc (CHF) against the Greenback.