Swiss Franc bounces up from lows as KOF leading Index beats expectations

• USD/CHF eases from session highs as the Swiss KOF Leading Index beats expectations.
• Swiss manufacturing activity has shown an unexpected improvement, with foreign and private demand increasing.
• The US Dollar remains steady near year-to-date highs, awaiting US employment figures.

The Swiss Franc has bounced up from session lows against the US Dollar (USD) on Tuesday, buoyed by an unexpected improvement in the Swiss economic activity outlook. The USD/CHF pair has pulled back to 0.8085 from session highs just above 0.8100, although it remains on track for a 3.5% monthly rally, amid broad-based US Dollar strength.

The KOF Leading Indicator, a forward-looking gauge of the country’s economic activity, has jumped to 101.2 in May, reaching levels slightly above average, from 98.6 in April, and against expectations of a moderate decline to 98.2.

The KOF Swiss Economic Institute's Economic Barometer revealed that positive developments on indicators related to the manufacturing sector have been the main driver of May’s improvement, while on the demand side, foreign and private consumption have shown favourable trends.

The Swiss Franc, however, remains relatively close to year-to-date lows, with the US Dollar boosted by a combination of rising bets on Federal Reserve rate hikes and investors’ caution amid uncertainty surrounding the Middle East conflict.

Against this backdrop, traders are looking from the sidelines, awaiting a string of key US employment indicators that might shed further light on the Federal Reserve's (Fed) rate hike calendar. Later on Tuesday, the JOLTS Job Openings report is expected to show solid job creation in May, although the highlight of the week is Thursday’s Nonfarm Payrolls report. June’s payrolls are foreseen growing by 110K, following a 172K increase in May, to confirm that labour market weakness has been left behind, and that the Fed can focus on inflation to set its near-term monetary policy.