USD/CHF consolidates its losses ahead of Swiss KOF/ US key data

• USD/CHF slumped from 0.8858 to 0.8770 amid the USD weakness.
• Market anticipated that the Fed would push back rate hikes in the next meeting.
• The renewed trade tension between US-China could benefit the safe-haven Swiss Franc.
• Investors will focus on the Swiss KOF Leading Indicator, US ADP private employment and estimate of Q2 GDP growth.

The USD/CHF pair consolidates its recent loss below the 0.8800 barrier during the early Asian session on Wednesday. The Greenback faces some follow-through selling due to the downbeat US data and a decline in bond yields. Meanwhile, the US Dollar Index (DXY), a measure of the value of USD against six other major currencies, hovers around 103.60 after reaching the bottom of 103.36. At the time of writing, the USD/CHF is trading at 0.8790, gaining 0.07%.

The US dollar is weakening broadly following softer US economic data. On Tuesday, the US Job Openings and Labor Turnover Survey (JOLTS) for July showed the lowest reading since March 2021 by decreasing to 8.827M versus 9.165M prior and against the 9.465M expected. Meanwhile, the Conference Board's (CB) Consumer Confidence Index for August fell to 106.10 from 114.00 in July, below the market expectation of 116.0. The S&P/Case-Shiller Home Price Indices improved to -1.2% YoY versus -1.7% prior and -1.2% estimated.

That said, Federal Reserve (Fed) Chairman Jerome Powell left the door open for a potential additional rate hike. However, it would depend on incoming data. The condition of the labor market may influence the USD's short-term direction. Market participants are awaiting the release of US employment data later this week, which could spark market volatility. The market anticipated that the Fed will push back rate hikes until the September meeting. According to the CME’s FedWatch Tool, markets are pricing in a 16% chance of a rate hike in the next meeting versus 20% prior. This, in turn, exerts some selling pressure on the USD.

On the other hand, US Commerce Secretary Gina Raimondo emphasized US concerns regarding difficulties operating American companies and national security issues during the visit to Beijing for four days. Furthermore, the US and China also discussed China's recent restrictions on gallium and germanium exports during a meeting. The exacerbating tension between the world’s two largest economies should dampen market optimism. This, in turn, might benefit the traditional safe-haven Swiss Franc and act as a headwind for the USD/CHF pair.

Moving on, market players will focus on the Swiss KOF Leading Indicator for August, the ZEW Survey, and the Consumer Price Index YoY. Across the pond, the US ADP private employment and estimate of Q2 Gross Domestic Product (GDP) data will be due on Wednesday, followed by the US inflation data on Thursday and the highly-anticipated Nonfarm Payrolls on Friday. These figures might trigger the volatility in the market and traders will find the trading opportunities around the USD/CHF pair.