USD/CHF recovers some lost ground above 0.8740 area ahead of the Swiss Unemployment data

• USD/CHF gains traction around 0.8742, up 0.19% for the day.
• The July employment and wage inflation report on Friday showed mixed results.
• President Joe Biden is likely to announce an executive order restricting US investments in China.
• Market players will focus on the Swiss Employment Rate and the US CPI for July.

The USD/CHF pair recovers some lost ground and surges above the 0.8740 mark during the early Asian session on Monday. Meanwhile, the US Dollar Index (DXY), a measure of the value of USD against six other major currencies, bounces off the 101.75 mark and currently trades near 102.05.

The US Dollar faced some selling pressure following the release of the July employment and wage inflation report on Friday. That said, the US Nonfarm Payrolls in the US rose by 187,000 in July, the US Bureau of Labor Statistics (BLS) reported on Friday. This figure was weaker than the market's expectation of 200,000. The June figures were revised lower to 185,000, the lowest reading since December 2020.

Furthermore, the unemployment rate fell to 3.5% from 3.6%, while annual wage inflation, as measured by changes in Average Hourly Earnings, came in at 4.4%, higher than the market estimation of 4.2%. The Labour Force Participation remained unchanged at 62.6%, while the U6 Unemployment Rate declined to 6.7%.

The mixed readings did not change economists’ anticipation about the Federal Reserve's stance. However, it would depend on the trajectory of inflation. According to the CME FedWatch tool, the probability of a 25 basis point (bps) hike in September remains steady, but the odds of a hike in November have increased slightly to approximately 30%.

On the other hand, investors will keep an eye on the US-China relationship. The US President Joe Biden is expected to issue an executive order to restrict US investments in China in the high-tech sector, artificial intelligence, semiconductors, and quantum computing this week, according to Reuters.  The exacerbated tensions between the world’s two largest economies might benefit the safe-haven Swiss Franc and act as a headwind for the USD/CHF pair.

Moving on, market players will focus on the Swiss Employment Rate due later on Monday. The figure is expected to remain unchanged at 2.0%. Later this week, the US Consumer Price Index (CPI) for July will be due on Thursday. Market expectations anticipate a 0.2% monthly increase. Also, the US Produce Price Index (PPI) will be released on Friday. Market participants will keep an eye on the data and find trading opportunities around the USD/CHF pair.