USD/CHF trades at 1-week high ahead of US labor market data

The USD/CHF currency pair held in proximity to a fresh one-week high of 0.8537 on Tuesday, after data revealed the Swiss economy had registered the fastest quarterly expansion since the second quarter of 2022, while annual CPI inflation had eased to its lowest level since March in August.

The US Dollar remained firm ahead of a series of essential macro data this week, including the Non-Farm Payrolls report, which could affect the size of an interest rate cut by the Federal Reserve in September.

Switzerland’s GDP expanded 0.7% quarter-on-quarter in Q2, while outpacing market consensus of 0.5% growth, underpinned by a 2.6% surge in the manufacturing industry.

The country’s headline inflation decelerated to 1.1% in August from 1.3% in the prior two months, data by the Swiss Federal Statistical Office showed.

And, the annual core inflation rate, which excludes volatile categories such as unprocessed food and energy, remained stable at 1.1% in August.

Meanwhile, investors now await the US job openings data on Wednesday, the initial jobless claims data on Thursday and the key Non-Farm Payrolls report on Friday for more insight into macroeconomic conditions.

Employers in all sectors of the US economy, excluding farming, probably added 163,000 job positions in August, according to market consensus, following a job growth of 114,000 in July.

“If the data remains robust, a 25 bps cut is more likely. However, a weak non-farm payrolls, particularly if it falls below 130,000 with another jump higher in unemployment rate, could push the rates market closer to pricing a 50 bps cut,” Charu Chanana, head of currency strategy at Saxo, was quoted as saying by Reuters.

Markets are now pricing in about a 31% chance of a 50 basis point Fed rate cut this month and a 69% chance of a 25 basis point rate cut.

As of 8:03 GMT on Tuesday the USD/CHF currency pair was edging up 0.25% to trade at 0.8532.