Swiss Franc gains as US economic data disappoints and Fed hike bets weaken

The Swiss Franc strengthened against the US Dollar on Wednesday as the US Greenback faced pressure from weaker-than-expected economic data. The USD/CHF pair traded around 0.8078, dropping almost 0.18% during the day. The ADP Employment Change for July came in at 44K, below the expected 70K and down from 98K in June. The ISM Services PMI index rose to 54.1 from 54 but fell short of the anticipated 54.5.

Oil prices continued to face pressure as hopes grew that commercial shipping through the Strait of Hormuz might resume soon. Iran and Oman reached an understanding regarding the coordinates of a proposed shipping route through the waterway, with Iran's Foreign Ministry stating that a joint statement is nearing completion. Lower energy-driven inflation risks and subdued US labor market data have reduced expectations for a Fed interest rate hike this year.

Markets now anticipate a 56% chance of a September rate increase, down from 67% the previous day. Traders now focus on Friday's Nonfarm Payrolls report for additional insight into the Fed's next move. However, a source familiar with the situation told Fars News that an agreement between Iran and Oman would not automatically reopen the Strait, and separate arrangements would still be necessary.

This uncertainty may discourage aggressive directional bets until a final agreement is reached. Switzerland's inflation remains close to the lower end of the SNB's 0%-2% price stability range, with the July CPI increasing by 0.4% YoY, down from 0.5% previously. The SNB is expected to keep its policy rate at zero. The Nonfarm Payrolls figure, which measures the change in US employment excluding agriculture, can influence the Federal Reserve's decisions by providing a measure of the Fed's success in achieving its mandate of full employment and 2% inflation.

A higher Nonfarm Payrolls figure typically supports the US Dollar, while a lower figure weakens it. Nonfarm Payrolls have a positive correlation with the US Dollar, meaning that higher-than-expected figures usually lead to a rally in the USD. Nonfarm Payrolls are negatively correlated with the price of Gold, so higher-than-expected figures can negatively impact Gold prices.