In early Asian trade on Monday, the USD/CHF pair rebounded and is now trading above 0.8740. The US Dollar Index (DXY), which measures the dollar’s value in relation to a basket of six major currencies, has risen from 101.75 to 102.05.
Following the release of job and wage inflation data for July on Friday, the US dollar fell. On Friday, the US Bureau of Labor Statistics (BLS) announced that nonfarm payrolls had increased by 187,000 in July. The 200,000 predicted by the market was not met. Since December 2020, the June revision has decreased to its lowest level ever, at 185,000.
The unemployment rate fell to 3.5% from 3.6% and annual pay inflation (as defined by Average Hourly Earnings) was 4.4%, both above the market consensus of 4.2%. The U6 Unemployment Rate dropped to 6.7%, and the LFP Rate stayed at 62.6%.
The Fed’s expected position was not changed by the contradictory data. It would depend on the course of inflation. CME FedWatch reports that the chances of a rate increase of 25 basis points (bps) in September have remained constant, while the odds of a hike in November have increased to 30%.
Yet, investors will keep an eye on developments in US-China ties. President Joe Biden, according to Reuters, will issue an executive order this week limiting investment by the United States in the Chinese high-tech, artificial intelligence (AI), semiconductor, and quantum computing industries. Rising tensions between the world’s two largest economies might be bad for the USD/CHF exchange rate and good for the safe-haven Swiss Franc.
Investors will be watching the Swiss Employment Rate later on Monday. The 2% target rate is appropriate. On Thursday, the United States will release its July Consumer Price Index (CPI). The market predicts a monthly increase of 0.2%. Friday marks the day that the US PPI is made public. Traders will keep an eye on the data and search for USD/CHF trade possibilities.
Trade Idea:
Consider monitoring USD/CHF for potential short-term buying opportunities if the pair maintains above 0.8740. Pay attention to US-China tensions and upcoming CPI and PPI data for trading cues.