USD/CHF gains ground on hawkish Fed about interest rates trajectory, trades around 0.8680

• USD/CHF continues to move on an upward trajectory after the blockbuster US Nonfarm Payrolls data.
• Fed’s Powell restated that initiating rate cuts in the March meeting may be premature.
• The Swiss National Bank is expected to initiate a rate cut in September 2024.

USD/CHF improved to 0.8680 during the Asian session on Monday, extending gains for the second straight session. The US Dollar (USD) received support as the market sentiment indicated that the Federal Reserve is unlikely to cut interest rates at March's meeting after the solid US employment figures released on Friday.

On Friday, the US Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls added 353K jobs in January, surpassing the previous reading of 333K and exceeding the market consensus of 180K. Average Hourly Earnings (MoM) came in at 0.6% for January, exceeding the expected 0.3% and 0.4% reading from December. The Unemployment Rate remained unchanged at 3.7% in January against the market consensus of 3.8%.

Jerome Powell, the Chair of the US Federal Reserve (Fed), has restated that initiating rate cuts in the March meeting may be premature. He stressed the importance of approaching the timing of rate cuts cautiously, considering the current strength of the economy. Moreover, Austan Goolsbee, the President of the Chicago Federal Reserve (Fed) Bank, expressed on Friday that he does not view the robust US job growth in January as a reason to delay interest rate cuts. Instead, he sees it as reassurance that the labor market is resilient and not on the verge of weakening.

The most recent data on the Swiss Manufacturing Purchasing Managers Index (PMI) indicated a marginal improvement in production growth in Switzerland, falling short of market expectations. Despite a surge in Gross Domestic Product surpassing market consensus, there has been a dip in Swiss Real Retail Sales and Consumer Demand. As a result, there is a prevailing anticipation in the market that the Swiss National Bank (SNB) is likely to implement its inaugural rate cut in September 2024, in line with consensus expectations.