USD/CHF depreciates further towards 0.8700 following Swiss inflation data

• USD/CHF extends its losing streak following the release of Swiss Consumer Price Index data on Friday.
• Swiss CPI rose by 1.3% as expected, remaining flat in July.
• The US Dollar loses ground ahead of employment data, including Nonfarm Payrolls and Average Hourly Earnings.

The USD/CHF is holding on to its losses for the fourth consecutive session following the release of Swiss Consumer Price Index (CPI) data on Friday. The Swiss Federal Statistical Office reported a 0.2% month-on-month decline in July, as expected. Meanwhile, year-on-year inflation rose 1.3% as expected, holding steady compared to the previous increase. The USD/CHF pair is trading around 0.8710 during the Asian session.

On Wednesday, the Swiss investor sentiment index fell to 9.4 in June, from a reading of 17.5 in June. Despite the drop, the index remains in positive territory, suggesting that the outlook remains moderately optimistic.

The USD/CHF pair’s decline could be attributed to the tepid US Dollar (USD) due to the subdued sentiment surrounding the Federal Reserve (Fed) policy outlook. The CME’s FedWatch tool shows that traders fully anticipate a 25 basis point rate cut on September 18.

Moreover, the latest manufacturing and labor market data have created a complex situation involving an economic slowdown in the United States (US) and increased expectations of a rate cut by the Federal Reserve. If the economic slowdown becomes too severe, it could negatively affect market sentiment, rendering any rate cuts by the Fed irrelevant.

The US ISM Manufacturing Purchasing Managers’ Index (PMI) fell to an eight-month low of 46.8 in July, compared with the previous reading of 48.5 and a forecast for a rise to 48.8. US Initial Jobless Claims for the week ended July 26 rose to 249K from 235K in the previous week, beating the forecast rise to 236K.

Traders are likely to keep a close eye on upcoming US Nonfarm Payrolls and Average Hourly Earnings data for July, due later in the American session, for insights into the US labor market.