USD/CHF moves below 0.8850 as market perceives a cooling US labor market

• USD/CHF continues to lose ground as US bond yields face pressure.
• Bank of America forecasts higher Fed Funds rates across the curve.
• Swiss Franc gains strength as SNB could raise interest rates in the future.

USD/CHF continues to move on a downward trajectory, trading lower around 0.8840 during the Asian session on Monday. The USD/CHF pair faces downward pressure as the market perceives signs of a cooling labor market in the United States (US). This indicates that the Federal Reserve (Fed) might have concluded its hiking cycle, leading to a weakening of the US Dollar (USD) over the previous week.

However, the Bank of America (BoA) is anticipating higher Fed Funds rates for an extended period, identifying upside risks. The revised forecasts indicate higher rates across the curve, with a projection of a 10-year US Treasury yield at 4.25% by the end of 2024. BoA's forecasts are positioned below market forwards but surpass consensus estimates, especially toward the conclusion of 2024. The 2-year yield forecasts suggest a potential for a higher cutting trough than the baseline in US economics.

US Dollar Index (DXY) extends its losses, bidding around 103.70 at the time of writing, with pressure on the US bond yields. The yield on the 2-year Treasury coupon bids lower at 4.88% by the press time.

On Friday, Swiss Industrial Production (YoY) for the third quarter came in at 2.0%, surpassing the previous quarter's -0.7%. The revised figure for the previous quarter was slightly higher, changing from -0.8%. This data reflects an improvement in Switzerland's industrial output, contributing positively to the Swiss Franc (CHF).

Additionally, Swiss National Bank (SNB) Chairman Thomas Jordan's hawkish comments mentioned not ruling out the possibility of more interest rate hikes in the future, continue to support and underpin the strength of the Swiss Franc (CHF).

The focus this Tuesday will be on the FOMC minutes, offering insights into the Fed committee's decision to hold rates, along with Swiss Import and Export data. These releases are anticipated to provide further clarity on the economic outlook for both nations.