- USD/CHF extends its upside near 0.8895 amid the strong USD and higher Treasury yield.
- July US Factory Orders came in at -2.1% MoM, below the market forecast of -0.1%.
- Market participants anticipate a 25 basis point (bps) rate rise for the entire year, bringing rates to 5.75%.
- Traders will focus on the US Non-Manufacturing PMI.
The USD/CHF pair gains traction for the second consecutive day below the 0.8900 barrier during the early Asian session on Wednesday. At the time of writing, the USD/CHF is trading at 0.8895, up 0.01% on the day. Meanwhile, the US Dollar Index (DXY), a measure of the value of USD against six other major currencies, reclaims the nine-month high of 104.80, supported by higher Treasury yield.
About the US data, the US Department of Commerce said on Tuesday that July US Factory Orders dropped to the lowest since mid-2020. The figure came in at -2.1% MoM, compared to a 2.3% rise in the previous month and below the market forecast of -0.1%. Last week’s highly anticipated report indicated that the US Nonfarm Payrolls (NFP) for August came in at 187K, above the prior readings of 157K and beating the expectations of 170K.
According to the World Interest Rates Probabilities (WIRP) tool, market participants anticipate a 25 basis point (bps) rate rise for the entire year, bringing rates to 5.75%. Additionally, Federal Reserve (Fed) Governor Christopher Waller said the Fed has more room to raise interest rates. He added that the data will determine if the Fed needs to raise rates again and whether the Fed is done raising rates. This hawkish remark boosts the US Dollar firmer against its rivals.
On the other hand, the Swiss economy remained stagnant in the second quarter. Data released from the Swiss Statistics on Monday showed that 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 weaker-than-expected Swiss data dragged the Swiss Franc (CHF) lower against the US Dollar.
On Tuesday, US Commerce Secretary Gina Raimondo said that she does not anticipate any revisions to US tariffs on China imposed during President Donald Trump’s administration until the US Trade Representative’s (USTR) Office completes its ongoing review, according to Reuters. That said, 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.
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. On Wednesday, the US ISM Servies PMI for August will be released in the American session. 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.