Market Analysis

The USD/CHF pair continues its upward momentum, trading around 0.8525 during the early European session on Tuesday, supported by a stronger US Dollar (USD). In Switzerland, inflation in August was weaker than anticipated, although the economy outperformed expectations. Traders are now looking ahead to the US ISM Manufacturing PMI data, set to be released later on Tuesday.

According to the Swiss Federal Statistical Office, the Consumer Price Index (CPI) rose by 1.1% year-on-year in August, down from 1.3% previously and below the market forecast of 1.2%. On a month-to-month basis, CPI inflation remained flat in August, following a 0.2% decline in July, missing expectations for a 0.1% increase.

Meanwhile, Switzerland's economy grew more robustly than expected in the second quarter (Q2), with the Gross Domestic Product (GDP) expanding by 0.7% quarter-on-quarter, up from the previous 0.5% and surpassing the forecast of 0.5%. Despite this strong economic performance, the Swiss Franc (CHF) saw little immediate benefit from the mixed data.

On the US side, rising US Treasury bond yields are providing some support to the Greenback. However, the upside potential for the USD/CHF pair may be capped as traders anticipate the Federal Reserve (Fed) could cut interest rates in September. The US August Nonfarm Payrolls (NFP) report, due on Friday, may offer further insights into the Fed's rate cut trajectory. Currently, financial markets are pricing in a 69% probability of a 25 basis points (bps) rate cut by the Fed in September, with a 31% chance of a 50 bps reduction, according to the CME FedWatch tool.

Paraphrasing text from "FX Street" all rights reserved by the original author.