Swiss Franc loses ground upbeat US Nonfarm Payrolls

• USD/CHF gives back part of its NFP-driven jump but remains positive on the day.
• Stronger-than-expected US Nonfarm Payrolls lift expectations of a Federal Reserve rate hike in September.
• Subdued Swiss inflation gives the Swiss National Bank room to keep its policy rate at 0%.

USD/CHF trades higher on Friday as stronger-than-expected United States (US) Nonfarm Payrolls (NFP) data trigger fresh volatility. The pair jumped to 0.8126 following the release before giving back part of its advance. At the time of writing, USD/CHF trades around 0.8102, up nearly 0.34% on the day.

US Nonfarm Payrolls (NFP) rose by 162K in August, comfortably beating expectations for a 56K increase. July’s reading was revised sharply higher to a gain of 21K from the previously reported 23K decline, while June payrolls were revised to 31K from 20K. The Unemployment Rate held steady at 4.1%, as expected.

The US Dollar and Treasury yields jumped in the immediate aftermath of the report, although both have since lost momentum. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.15 after rising as high as 99.39 following the data.

Even so, the strong employment figures have lifted expectations of a Federal Reserve (Fed) rate hike at the September 15-16 meeting. According to the CME FedWatch Tool, markets now see around a 60% chance of a 25-basis-point increase, up from roughly 50% before the NFP release.

US President Donald Trump welcomed the data in a Truth Social post, calling it a “great jobs number,” while renewing his call for lower borrowing costs. Trump said that “a strong country means a lower interest rate,” adding, “LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT.” He also said the “Fed Board, with its great new leader, must get smart.”

The US Dollar’s inability to sustain its initial gains reflects lingering uncertainty over the Fed’s monetary policy path. Although the robust jobs report strengthens the case for a September rate hike, recent data have also pointed to moderating inflation. With policymakers remaining committed to restoring price stability, next week’s August Consumer Price Index (CPI) and Producer Price Index (PPI) reports will be crucial in determining whether the Fed raises rates at its upcoming meeting.

On the Swiss side, inflation remains subdued, allowing the Swiss National Bank (SNB) to keep its policy rate at 0%. August inflation exceeded expectations, rising 0.4% MoM following July’s 0.1% decline, while the annual rate accelerated to 0.8% from 0.4%.

According to BBH, “the SNB has plenty of room to keep rates at 0.00% for some time, given that inflation remains well within the bank’s price stability mandate of less than 2% per annum,” a backdrop that they suggest may limit sustained upside for the Franc over the coming quarters.