USD/CHF gains modest traction near 1.8740 as investors await US inflation

• USD/CHF gains modest traction just below the 1.8740 mark in the early Asian session.
• Fed policymakers said more rate hikes would be needed to bring inflation down to target.
• The headline surrounding the US-China relationship remains in focus.
• Market players will keep an eye on the US Consumer Price Index (CPI), Producer Price Index (PPI).

The USD/CHF pair holds modest gains during the early Asian session on Monday. The pair currently trades around 0.8738, up 0.11% for the day. Meanwhile, the US Dollar Index (DXY), a measure of the value of the USD against six other major currencies, surges above 102.18 while investors await US inflation data for fresh impetus.

According to Reuters, Federal Reserve (Fed) Governor for Atlanta Michelle Bowman indicated that additional rate increases will likely be necessary to return inflation to the target level. John C. Williams, president of the New York Fed, expected that interest rates would continue to fall in the coming year.

About the data, total US consumer credit increased by $17.85 billion in June, rising from $4,979.2 billion to $4,997.1 billion, above market estimates of a $13 billion gain. Last week, US Nonfarm Payrolls rose 187,000 in July, worse than expected by 200,000. The Unemployment Rate fell to 3.5% from 3.6%, and the Average Hourly Earnings came in at 4.4%, higher than the market estimation of 4.2%. Following the mixed employment and wage inflation data, market players will take cues from the US inflation data due later this week. The stronger than expected data could convince the Fed to maintain its hawkish stance and hike additional rates for the entire year.

On the Swiss front, the State Secretariat for Economic Affairs (SECO) revealed on Monday that the Swiss Unemployment Rate came in at 1.9% in July, matching expectations. The figure remained unchanged compared to the June reading and marked its lowest level since October 2022.

Apart from this, the headline surrounding the US-China relationship remains in focus. According to Reuters, US President Joe Biden is expected to issue an executive order this week to restrict US investments in China in the high-tech sector, artificial intelligence, semiconductors, and quantum computing. 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.

Later this week, the US Consumer Price Index (CPI) for July will be due on Thursday. Market expectations anticipate a 0.2% monthly increase in CPI MoM for July. 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.