USD/CHF extends its upside above 0.8900, US economic data eyed

• USD/CHF trades in positive territory for the third consecutive day.
• US ISM Services PMI rose to 54.5 in August vs. 52.7 prior, above the market consensus of 52.5.
• The US will extend China's "Section 301" tariff exemptions on some imports until December 31.
• Market players will monitor US weekly Initial Jobless Claims, Unit Labor Costs for Q2.

The USD/CHF pair gains momentum near 0.8915 during the early Asian session on Thursday. The major pair attracts some buyers close to the monthly highs since July following the upbeat US economic data. Meanwhile, the US Dollar Index (DXY), a measure of the value of USD against six other major currencies, hovers around 104.85 after retreating from a six-month high of 105.02.

Markets expect the Federal Reserve (Fed) will keep interest rates over 5% for a longer period. The Federal Reserve (Fed) Governor Christopher Waller stated that they have further room to increase interest rates, but the data will determine whether the Fed needs to hike rates again and if it is done hiking rates. While, Fed Boston President Susan Collins pointed out the risk of an inappropriately restrictive monetary policy stance and called for a patient and careful, but deliberate policy.

Institute for Supply Management (ISM) reported on Wednesday that the US ISM Services PMI rose to 54.5 in August from 52.7 the previous month, above the market consensus of 52.5. This figure is the highest since February. Furthermore, the S&P Global Composite's final readings fell to 50.2 in August from 50.4 in July.

On the other hand, The office of US Trade Representative Katherine Tai extended China's "Section 301" tariff exemptions on 352 Chinese imports and 77 COVID-19-related categories until December 31, which were supposed to expire on September 30, per Reuters. This action will allow for more consideration under a statutory four-year review That said, the negative development or the renewed trade war tension between the US and China might benefit the traditional safe-haven CHF and act as a headwind for USD/CHF.

Furthermore, the downbeat Swiss economic data weigh on the Swiss France (CHF) this week. That said, the Swiss economy remained stagnant in the second quarter. The nation’s Gross Domestic Product (GDP) Q2 dropped to 0.0% QoQ, below the market consensus of 0.1% and the previous quarter's reading of 0.3%. On an annual basis, the growth number remained at 0.5% as expected, the Swiss Statistics reported on Monday.

Later this week, the US weekly Initial Jobless Claims and Unit Labor Costs for Q2 will be due. These figures could give a clear direction for the USD/CHF pair. In the absence of top-tier economic data releases from Switzerland later this week, the USD price dynamic will be the main driver for the USD/CHF pair.