USD/CHF consolidates in a narrow range around 0.8760 amid a cautious market mood

• USD/CHF remains confined between 0.8750-0.8765 range on Wednesday.
• Moody's downgraded the ratings of several small to mid-sized US banks.
• The headline surrounding the US-China trade war remains in focus.
• The US Consumer Price Index (CPI), the Produce Price Index (PPI) will be in the spotlight this week.

The USD/CHF pair struggles to gain any meaningful traction and oscillates in a narrow trading range, just above mid-0.8700 during the early Asian session on Wednesday. The pair currently trades around 0.8760, gaining 0.03% for the day.

On Monday, Moody's downgraded the credit ratings of several small to mid-sized US banks and issued a warning about possible cuts to the ratings of larger institutions. The giant credit rating company stated that the higher interest rates have also elevated the prospect of a recession, putting pressure on the banking industry as well as real estate to adapt to post-pandemic reality.

Furthermore, the US trade data show a sluggish economic rebound and subdued global demand in the country. The US trade deficit narrowed sharply in June, with the figure coming in at $65.5 billion, higher than expectations of $65 billion and below the $68.3 billion prior. Imports fell 1.0% to $313 billion from $316.1 billion the previous month, the lowest level since November 2021. While, Exports dropped 0.1% to $247.5 billion, a 15-month low,

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.

Additionally, the headline surrounding the US-China relationship remains in focus. On Tuesday, Bloomberg reported that the US intends to target only Chinese companies that generate more than 50% of their revenue from quantum computation and artificial intelligence (AI). However, US President Joe Biden is expected to issue an executive order this week about the restriction. The exacerbated trade war 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.

In the absence of the economic data release from Switzerland, the US Consumer Price Index (CPI) for July and the Produce Price Index (PPI) will be in the spotlight this week. Also, the development of the US-China relationship remains in focus. Market participants will keep an eye on the data and find trading opportunities around the USD/CHF pair.